Markets reversed direction and trended lower for the second half of October. A welcome end-of-the-month bounce helped to pare down some of the losses.
The labor market continues to show remarkable resiliency. The October 19th weekly jobless claims report showed that initial claims dropped to 198,000. That decline resulted in the first sub-200,000 reading since January of this year. Claims did rise a bit the following week, with the October 26th report showing 210,000.1 Overall the labor market remains tight with more job openings than workers to fill them.
The domestic economy also continues to surprise. Estimates for the third quarter Gross Domestic Product (GDP) called for a strong 4.7% rate – the actual number came in at 4.9%, representing the fastest pace of growth in 2 years.2 This growth was fueled by robust consumer spending as September retail sales exceeded estimates for the third straight month. Relative to April, the six-month average number of sectors showing positive month-over-month sales growth has experienced its most positive reversal since at least 1992.3
Following an exceptional third quarter, growth will likely slow in the fourth quarter and expectations are for GDP closer to 2%.4 That’s due to an expected moderating in consumer spending resulting from tighter credit, higher borrowing costs, and the resumption of student loan payments. In addition, the fourth quarter will likely see a decrease in government spending as Congress again works to pass a budget ahead of the latest November 17th deadline. If a budget is passed, we anticipate it will include austerity measures aimed a decreasing government spending. If not, the resulting government slowdown will naturally limit capital outlays. Naturally, we’ll be tracking this closely over the next few weeks.
Looking forward the Federal Reserve (the Fed) will conclude its second-to-last meeting for 2023 later today. It is widely expected that they will choose to hold interest rates steady. The market will pay keen attention to Chairman Powell’s remarks following the meeting for any hints about future rate increases.
Reviewing returns for the second half of October, the markets all dropped. As of market close on October 31st, the Dow Jones Industrial Average (Dow) fell 617 points (1.83%), the S&P 500 dropped 134 points (3.1%) and the NASDAQ Composite Index (NASDAQ) lost 556 points (4.15%).
1www.investors.com “Dow Jones Falls After GDP, Jobless Claims; Meta Stock Dives On Earnings, Amazon Next” October 26, 2023
2www.jpmorgan.com “Weekly Market Recap; Week of October 20, 2023” October 30, 2023
3www.mfs.com “Beyond the News” October 23, 2023
4 “Notes on the Week Ahead; Slowdown Delayed; Cooldown Ahead of Schedule” Dr. David Kelly, October 30, 2023
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