U.S. equity markets declined in October. The S&P 500 declined 1.82% for the month, while small cap stocks, as measured by the Russell 2000, declined by 4.75%. Value stocks outpaced growth stocks, though both were negative. Developed international stocks declined 1.70%, but emerging market stocks continued their recent leadership with a 0.25% return that outpaced U.S and developed international markets.
Fixed income markets were challenging in October as rates increased, particularly at the longer end of the curve. The yield on the benchmark 10-year Treasury increased from 1.60% to 1.84% during the month. The Barclays Aggregate Bond Index declined by 0.76% for the month as Treasuries declined 1.10% and Barclays Investment Grade Bond Index declined by 0.81%. The Barclays High Yield Index bucked the trend and posted a 0.39% increase for October.
Monthly Recap
EQUITY MARKETS
Major U.S. equity indices declined in October, despite earnings for the S&P 500 apparently ending a five quarter slump. Value stocks outperformed growth stocks and large caps beat small caps. Developed international equities recorded negative returns while emerging market stocks managed to post a slight positive return.
FIXED INCOME MARKETS
The yield curve steepened again in October, with short term rates remaining flat and longer term rates increasing. In a repeat of last month’s result, Treasuries and investment grade corporates declined in value while high yield managed to post a modest positive return.
ECONOMIC DATA
As expected, the advance estimate of third quarter GDP strengthened from the weak growth displayed during the first half of the year. Net exports contributed 0.83% to the 2.9% growth (best level since third quarter 2014) exhibited by the U.S. economy, and inventory restocking contributed 0.61%. Job creation disappointed in September (data released in October) for the second consecutive month. Home sales and building permits improved from the prior month and the ISM surveys measuring the manufacturing and service sectors both rebounded and were above the 50 level that denotes continued expansion. Presidential election news continues to dominate the airwaves and is fueling uncertainty in the markets.
| Event | Period | Estimate | Actual | Prior | Revised |
|---|---|---|---|---|---|
| Nonfarm Payroll | Sep | 172,000 | 156,000 | 151,000 | 167,000 |
| Unemployment | Sep | 4.90% | 5.00% | 4.90% | |
| ISM Manufacturing | Sep | 50.4 | 51.5 | 49.4 | |
| Univ. of Mich. Sentiment | Oct (F) | 88.2 | 87.2 | 87.9 | |
| ISM Non-Manufacturing | Sep | 53 | 57.1 | 51.4 | |
| Retail Sales ex Auto & Gas | Sep | 0.30% | 0.30% | -0.10% | 0.00% |
| PPI MOM | Sep | 0.20% | 0.30% | 0.00% | |
| PPI MOM ex Food & Energy | Sep | 0.10% | 0.30% | 0.30% | |
| PPI YOY | Sep | 0.60% | 0.70% | 0.00% | |
| PPI YOY ex Food & Energy | Sep | 1.20% | 1.20% | 1.00% | |
| CPI MOM | Sep | 0.30% | 0.30% | 0.20% | |
| CPI MOM ex Food & Energy | Sep | 0.20% | 0.10% | 0.30% | |
| CPI YOY | Sep | 1.50% | 1.50% | 1.10% | |
| CPI YOY ex Food & Energy | Sep | 2.30% | 2.20% | 2.30% | |
| Industrial Production | Sep | 0.10% | 0.10% | -0.40% | -0.50% |
| Housing Starts | Sep | 1,175,000 | 1,047,000 | 1,142,000 | 1,150,000 |
| Building Permits | Sep | 1,165,000 | 1,225,000 | 1,139,000 | 1,152,000 |
| New Home Sales | Sep | 600,000 | 593,000 | 609,000 | 575,000 |
| Existing Home Sales | Sep | 5,350,000 | 5,470,000 | 5,330,000 | 5,300,000 |
| Leading Index | Sep | 0.20% | 0.20% | -0.20% | |
| Durable Goods Orders | Sep (P) | 0.00% | -0.10% | 0.10% | 0.30% |
| S&P CoreLogic CS 20-City YOY | Aug | 5.00% | 5.13% | 5.02% | 4.98% |
| Personal Income | Sep | 0.40% | 0.30% | 0.20% | |
| Personal Spending | Sep | 0.40% | 0.50% | 0.00% | -0.10% |
| GDP Annualized QOQ | 3Q (A) | 2.60% | 2.90% | 1.40% |
Click here for a PDF of Glenn Dorsey’s Monthly Recap
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