11/2/18 – Markets Rebound, Strong Jobs Report

The stock market rallied for much of the week, recouping over half of last week’s losses. Both major indices increased 2.4% this week. Strong earnings and increased optimism on a Chinese trade deal helped push markets higher.

The October jobs report showed the US economy added 250k net new jobs last month. This was significantly better than expectations and a nice reversal from a rather weak September. The unemployment rate remained at 3.7%. Wage growth was a bright spot as well. Wages grew at a 3.1% annual rate, the best level in nine years. While the report was generally very strong, stocks sold off today, partially on fears that this report will lead the Fed to additional interest rate increases. Fed policy is always a balancing act between raising rates too fast and potentially causing a recession and raising rates too slowly allowing inflation to take hold. Everyone expects an interest rate increase in December, but 2019 is less certain. The US economy is strong right now, but weakness in other countries could hurt our prospects. The market‘s perception of how the Fed will navigate this will help drive stocks in the coming months. Read More

With oil prices in a free fall, gas prices are expected to follow suit as we approach the holiday shopping season. Oil is down almost 20% over the last month and that decline is starting to reach consumers. The next two months are critical for the retail industry and this price decline could put more money into consumers pockets. The consumer represents roughly two-thirds of the US gross domestic product and lower gas prices could push holiday spending even higher. Read More

Oil decreased this week, declining 7.2% to close at $62.82/barrel. The yield on the 10-yr Treasury moved higher, closing at 3.22% from 3.08% last week. The average rate on a 30-yr fixed rate mortgage moved lower to 4.83%, from 4.86% last week.

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