In this week’s recap: more downward pressure on equities, retiree incomes get a boost, yearly inflation declines, and consumer sentiment misses expectations.
Weekly Economic Update
October 15, 2018
UNCERTAINTY BREEDS SELLING, FOLLOWED BY A RELIEF RALLY
On Friday, Wall Street rebounded from a disquieting slump that saw the blue chips take an almost 1,400 point dive. The S&P 500 gained 1.42% to snap a 6-session losing streak, the Nasdaq Composite rose 2.29% to fight back from a correction, and the Dow rose 1.15%. A new earnings season may take investors’ minds off the insecurities they have felt recently about bond yields, tariffs, and interest rate hikes. Those uncertainties weighed on equities again this past week: the Dow fell 4.19% to 25,339.99; the S&P, 4.10% to 2,767.13; the Nasdaq, 4.86% to 7,496.89. Small caps had it worse than the big three last week: the Russell 2000 lost 5.23%.1,2
INFLATION SOFTENED LAST MONTH
Advancing only 0.1% for September, the headline Consumer Price Index showed a yearly gain of 2.3%, quite a contrast from the 2.9% increase measured in July. The core CPI also advanced 0.1%, and its 12-month gain was unchanged at 2.2%. If further deceleration in the annual inflation rate occurs, that might give the Federal Reserve some pause.3
A LITTLE LESS CONFIDENCE ON MAIN STREET
The latest University of Michigan consumer sentiment index fell short of the heights forecast by economists surveyed by Briefing.com. They expected a preliminary October reading of 100.0. Instead, the index fell to 99.0, 1.1 points below its final September mark.4
SOCIAL SECURITY BENEFITS WILL GROW 2.8% IN 2019
Retirees will soon see a boost in their Social Security payments. Thursday, the Social Security Administration announced that retirement benefits will receive their largest cost-of-living adjustment (COLA) since 2012 next year. The improvement will lift the average monthly payment to an individual from $1,422 to $1,461. The mean monthly payment to a retired couple will rise from $2,381 to $2,448.5
On Monday, Bank of America reports Q3 results and the Census Bureau releases its latest monthly retail sales snapshot. | BlackRock, Comerica, CSX, Del Taco, Domino’s, J.B. Hunt, IBM, Infosys, Johnson & Johnson, Morgan Stanley, Netflix, UnitedHealth, and W.W. Grainger all announce earnings Tuesday. | Minutes from the Federal Reserve’s September policy meeting surface Wednesday, along with data on September housing starts and building permits and earnings from Abbott Labs, Alcoa, Kaiser Aluminum, Kinder Morgan, Northern Trust, Union Bank, U.S. Bank, United Rentals, and Winnebago. | American Express, Bank of New York Mellon, BB&T, Blackstone Group, Celanese, E*Trade, KeyCorp, Novartis, Nucor, PayPal, Philip Morris, Snap-On, Sonoco, Textron, Travelers Companies, and WD40 present earnings Thursday, when the latest initial jobless claims figures also appear. | Friday, Honeywell, Manpower, Procter & Gamble, Schlumberger, State Street, SunTrust, VF Corporation, and Volvo offer earnings news, and September existing home sales data emerges from the National Association of Realtors.
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10 YR TIPS
Sources: wsj.com, bigcharts.com, treasury.gov - 10/12/182,6,7,8 Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year TIPS real yield = projected return at maturity given expected inflation.
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1 - thestreet.com/markets/stocks-on-wall-street-rebound-friday-14742963 [10/12/18]
2 - markets.wsj.com/us [10/12/18]
3 - marketwatch.com/story/housing-costs-nudge-inflation-higher-in-september-cpi-shows-2018-10-11 [10/11/18]
4 - briefing.com/investor/calendars/economic/2018/10/08-12 [10/12/18]
5 - kiplinger.com/article/retirement/T051-C001-S001-social-security-benefits-to-increase-in-2019.html [10/11/18]
6-bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=10%2F13%2F08&x=0&y=0 [10/12/18]< br>6-bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=10%2F13%2F08&x=0&y=0 [10/12/18]< br>6-bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=10%2F13%2F08&x=0&y=0 [10/12/18]
7 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [10/12/18]
8 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [10/12/18]
Posted on Tue, October 16, 2018
by Sound Financial