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THE WEEK IN REVIEW: Nov. 19-25, 2023
📈 Stocks move higher in a quiet trading week Last week was a fairly quiet one, with many people off for the Thanksgiving holiday. However, a couple of notable pieces of data dropped. On Wednesday, the Commerce Department reported that durable goods orders decreased 5.4% in October, the second-biggest decline since April 2020. But on Friday, S&P Global released its estimates of growth in business activity during November. The report showed that the services sector had a big pick-up over the past few weeks, compensating for a bigger-than-expected slowdown in manufacturing. So kind of a big mixed bag as far as data goes. Slowing growth signals and dwindling inflation fears drove up demand for the $16 billion auction of 20-year U.S. Treasury bonds early last week. The auction drove down the yield on the benchmark 10-year Treasury note to an intraday low of 4.37% by Wednesday — its lowest level in two months. It didn’t stay that way for long, however; the 10-year yield popped back up by Friday. Speaking of Friday: Shoppers were out in full force for Black Friday, spending a record $9.8 billion. (That’s an increase of 7.5% from 2022.) It’s a great start to the holiday season for retailers. 🏠 Things are tough for home sellers Home sales fell in October to a 13-year low, pummeled by high home prices and interest rates. Sales of existing homes — which make up a big chunk of the housing market — decreased 4.1%, the lowest since August 2010, according to the National Association of Realtors®. But we could be rounding the bend; mortgage rates have started to pull back somewhat and spurred a small burst of applications from buyers in early November. 🗓️ Coming this week
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🥳 It is both my wife and son’s birthday this week, and I wanted to surprise them by saying Happy Birthday here. Surprise! And speaking of surprises Q3 earnings season began winding down on a relatively positive note. For Q3 2023 81% of S&P 500 companies have reported a positive Earnings Per Share surprise, and 61% of S&P 500 companies have reported a positive revenue surprise. Not bad. That makes the estimated year-over-year earnings growth about 4.1%. If that is the actual growth rate for the quarter, and we are about 91% through the reporting, it will mark the first quarter of year-over-year earnings growth reported since this time in 2022 when we all thought we were staring down a recession.
🎂 Revenue growth has been the most significant contributor to earnings, adding 3.9%, a sign that consumers are still spending. Across sectors, energy has been the largest drag on earnings, while consumer discretionary has been the most buoyant. The frosting on the cake? Maybe, but analysts are now projecting year-over-year earnings growth of only 3.2% next quarter. So the party is perhaps showing signs of also winding down. Corporate commentary has been downbeat, portraying a more challenged business environment heading into 2024. 🎁And management isn’t the only one blowing out candles out there. The University of Michigan Consumer Sentiment Index declined to 60.4, missing consensus estimates of 63.7. Given the parade of bad news, mainly in the form of political and geopolitical events, it’s not surprising. But future spending hinges, at least in part, on confidence and sentiment. This could be an issue for the aforementioned consumer discretionary sector. But fear not, I’ll be helping that sector out in Q4 buying birthday presents. Maybe it will be enough. -Patrick Huey, CFP®, CAP®, ATP Victory Independent Planning 💃🏽Two weeks back, the financial world was looking like a typical high school dance with two sides staying far apart from each other. The 10- year Treasury Note yield rose to 5% and the S&P 500 slid into a correction. But hold onto your pom poms because last week the 10-year yield decided to take a break back toward 4.6%. And the S&P 500 made a comeback as Fed cheerleaders changed their chants from "we hope the Fed's got this" to "the Fed's really 😎The Fed jocks decided to play it cool and keep rates as they are, but they're as indecisive as most teenagers. Their statement was basically some minor word swaps like calling the economy "strong" instead of "solid" and saying employment gains have "moderated" instead of "slowed." Someone must have been brushing up on the thesaurus during English class. 📉And then, the crowd went wild as nonfarm payrolls increased by just 150,000 in October, which is what the Fed and investors have been screaming for. Slower growth, less wage inflation, and a slightly higher unemployment rate. But hold on, folks, because this could also mean we're tiptoeing toward a recession next year. And lo and behold, the ISM Non- Manufacturing Index dipped to 51.8 in October. The service sector is still performing, but it's running out of gas. Most major industries reported growth, but it's like expecting a party and getting a meeting of the math club. 🤓 |
Patrick HueyPatrick Huey is a small business owner and the author of two books on history and finance as well as the highly-rated recently-released fictional work Hell: A Novel. As owner of Victory Independent Planning, LLC, Patrick works with families and non-profit organizations. He is a CERTIFIED FINANCIAL PLANNER™ professional, Chartered Advisor in Philanthropy® and an Accredited Tax Preparer. He earned a Bachelor’s degree in History from the University of Pittsburgh, and a Master of Business Administration from Arizona State University. Archives
May 2024
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