October 27, 2023

Weekly Market Commentary October 23rd to 27th 2023

Gross Domestic Product, the most closely followed measurement of economic output, grew at a 4.9% annualized pace in the third quarter. The last three months were, by all accounts, a “spending spree” for consumers as both goods and services increased 4.8% and 3.6%, respectively. However, economists expect growth to slow in the coming months as consumers have exhausted their savings accounts and have turned to credit cards, 401k withdrawals and second jobs to offset their spending habits. As a result, Personal Savings have declined from 5.2% to 3.8%. Positive contributions also came from an increase in inventories and government spending.

Core Personal Consumption Expenditures Index (PCE) increased 3.7% which represents the smallest year-over-year increase since May of 2021. Although inflation has been on a downward trajectory since its 5.6% peak in early 2022, the report is not expected to materially impact the Fed’s rate trajectory as it works to achieve its 2% target. The biggest contributions came from increases in prescription drugs, cars, travel and housing.

Pending Home Sales increased 1.1% versus -1.5% that was expected. This positive number is coming off an extremely low comp of -7.1% last month so don’t expect a new (positive) trend to emerge within the housing market. Pending Home Sales were -13.1% YoY, the smallest decline since May 2022. South, Midwest and Northeast posted increases but West saw contracts fall to a fresh new low.

The S&P 500 finished the week at 4,117, its lowest level since May, after falling 2.5%. Relatively impressive earnings weren’t enough to keep stocks afloat as investors found reasons to sell regardless of the headline numbers. The tech heavy Nasdaq was equally weak, finishing at 12,643, down 2.6%. The Dow Jones Industrial index fared the best for the week falling only 2.1% to 32,418. In the fixed income markets, the treasury curve experienced a parallel shift lower with the 10-Year finishing at 4.84%

Next week’s releases include the Federal Reserve decision on interest rates and the Unemployment Report.

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