Market Snapshot | October 29th, 2018 | Darel Ansley | People's Bank
October 29, 2018 | Darel Ansley

 
   
REVIEW OF LAST WEEK
 
   
TURN THE PAGE... Let us simply move on from this very bad week in the stock market, whose best performance was the 3.0% dive for the Dow.Investors worried about earnings growth, even though the data proved otherwise. 
To wit, FactSet reported the blended third quarter corporate earnings growth rate was 22.5%,  and the forward 12-month earnings-per-share estimate is up 0.8% over the same period.   

Friday, we learned the economy grew 3.5% annually in Q3, after 4.2% growth in Q2, the best consecutive quarters of economic performance since 2005. So, what worries Wall Street? That the Fed will hike too fast and kill the party.
The week ended with the Dow down 3.0%, to 24688; the S&P 500 down 3.9%, to 2659; and the Nasdaq down 3.8%, to 7167.   The weakness in stocks sent traders over to bonds, pushing prices higher. The 30YR FNMA 4.0% bond ended UP .47, at $100.36.  Freddie Mac's latest Primary Mortgage Market Survey had t he national  average 30-year fixed mortgage rate up just one basis point (0.01%) Remember, mortgage rates c an be extremely volatile, so check with your mortgage professional for up-to-the-minute information.   DID YOU KNOW?... A recent report on insights from 3,000 consumers revealed that more video is now consumed on computers, tablets and smartphones than on TV.
 

 
   
THIS WEEK'S FORECAST
 
   
INFLATION MILD; EMPLOYMENT COSTS UP; JOBS,  FACTORIES STRONG... The Fed likes the Core PCE Prices take on inflation, so it's good that a mild read is forecast. But more inflation could come with a climbingEmployment Cost Index. In line with that, we should see growth in wages( Average Hourly Earnings ) and Nonfarm Payrolls in Friday's jobs report. Finally, the ISM Index is expected to reveal factories are still humming nicely.
NOTE: Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and higher loan rates.
 

 
   
FEDERAL RESERVE WATCH
 
   
Forecasting Federal Reserve policy changes in coming months... The market expects the Fed Funds Rate to hold come November, then bump up a quarter percent in December, but stay there through the beginning of next year.Note: In the lower chart, a 5% probability of change is a 95% probability the rate will stay the same.

Current Fed Funds Rate: 2.00%-2.25%
AFTER FOMC MEETING ON: CONSENSUS
Nov   8
2.00%-2.25%
Dec 19
2.25%-2.50%
Jan  30 2.25%-2.50%
Probability of change from current policy:
AFTER FOMC MEETING ON: CONSENSUS
Nov   8
   5%
Dec 19
  74%
Jan 30
  32%
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