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


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.


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.


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%
F = Final, P = Preliminary, A= Advance. Source: Bloomberg

Click here for a PDF of Glenn Dorsey’s Monthly Recap

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