October 29, 2021

Weekly Market Commentary October 25th to October 29th 2021

The first estimate of Third Quarter Gross Domestic Product (GDP) grew at an annualized pace of 2.0%. This is on the low end of the estimated range and (as expected) well below the unrevised 6.7% in Q2. Personal Consumption growth slowed considerably to 1.6%. Services were a lone bright spot, higher by 7.9%. Declining auto sales due to semiconductor chip shortages were a key detractor, reducing growth by -2.3%. This led final sales (GDP ex-inventories) to dip into negative territory for the first time since the pandemic lockdown.

Durable Goods Orders fell -0.4% in September, less than the -1.1% estimate. Nondefense capital goods orders (ex-aircraft), which more closely represents core business spending, rose 0.8%. Shipments continue to lag orders however as producers continue to have a difficult time getting products to end consumers due to transportation bottlenecks.

Personal Consumption Expenditures (PCE) rose 0.6% in September. Consumer demand remained despite rising prices for energy and services. Areas of contraction were more supply than demand driven due to inventory shortages and supply chain bottlenecks for hard goods like autos, appliances, and electronics. The year-on-year PCE price increase grew by 4.4%, modestly below expectations and the revised prior month reading.

Initial Jobless Claims eased to 281k, a 10k decline from the prior week and consensus forecasts. The 4-week moving average now stands at 299k, a decrease of 20k. Companies continue to struggle to fill open positions and the rate of layoffs continues to decline.

The S&P 500 was higher by 1.3% on the week to a new record high 4,605. The NASDAQ Composite broke into unchartered territory as well, higher by 2.7%. The yield on the 10-Year U.S. Treasury pulled back by 7 basis points to 1.56%.

Key economic releases next week include Nonfarm Payrolls and ISM Manufacturing and Services as well as an FOMC policy meeting in which a bond purchase tapering announcement is highly anticipated.

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