Weekly Market Update, December 16, 2019

Posted on December 17, 2019 by Neal Gallagher

Presented by Mark Gallagher

General Market News
• The volatility in rates continued last week. The 10-year Treasury yield moved from 1.77 percent to 1.95 percent and back down to 1.81 percent before opening at 1.85 percent on Monday. The 2-year moved from 1.58 percent to 1.69 percent and opened at 1.62 percent on Monday. The 30-year opened at 2.27 percent after briefly hitting 2.36 percent last week.
• Global markets rallied last week following the U.S. and China agreeing upon a phase one trade deal. The terms included additional U.S. agricultural purchases in exchange for the repealing of certain U.S. tariffs on Chinese goods. Emerging market stocks rose as a result, as investors saw easing trade tensions as a catalyst for investment. There was also positive trade news to report here in North America, with the U.S. House and President Trump agreeing upon the terms of the U.S.-Mexico-Canada Agreement.
• In European news, the U.K. held its third general election in five years, and the conservative party took a significant majority in Parliament. This majority will look to continue to push for a Brexit at the start of 2020.
• The top-performing sectors on the week were technology, consumer discretionary, and financials. The lagging sectors included the risk-off bond proxies in REITs, communication services, utilities, and consumer staples.
• On Wednesday, November’s Consumer Price Index (CPI) was released. Consumer prices increased by 0.3 percent during the month, which was slightly higher than the 0.2 percent forecast. This inflation growth was due to rising gas prices, as core CPI, which strips out the impact of volatile food and energy prices, rose by only 0.2 percent for the month. Consumer inflation rose to 2.1 percent on a year-over-year basis, which is a one-year high. Despite the faster-than-expected growth in November, September’s tariffs have not had much of an effect on consumer goods. It remains unlikely that we will see significantly faster inflation in the short term.
• On Thursday, November’s Producer Price Index data was released. Producer inflation came in flat for the month, against expectations for a 0.2 percent increase. This result dragged year-over-year inflation down to 1.1 percent, well below the Fed’s stated 2 percent inflation target. This was caused primarily by slowing prices for services, which fell by the most in a single month since February 2017, due to decreasing trade services margins. November’s lackluster inflation reports support the Fed’s pause as it waits to see if further easing is necessary.
• We finished the week with the release of November’s retail sales report. Retail sales came in below expectations, growing by 0.2 percent against expectations for 0.5 percent growth. Rising auto and gas sales boosted headline sales, as core retail sales grew by only 0.1 percent. This is a disappointing result, as there was some hope for accelerated sales growth, given improvements to consumer confidence during the month. Consumer spending has been the major driver of economic growth this year, so this slowdown indicates that overall economic growth is likely slowing as well. With that being said, there is some reason for optimism going forward, as an improving job market and continued support from the Fed indicate that spending is unlikely to fall further in the short term.

Equity Index	Week-to-Date	Month-to-Date	Year-to-Date	12-Month
S&P 500	0.77%	0.98%	28.89%	22.00%
Nasdaq Composite	0.93%	0.85%	33.03%	24.91%
DJIA	0.49%	0.43%	23.57%	17.21%
MSCI EAFE	1.72%	2.10%	20.66%	17.11%
MSCI Emerging Markets	3.63%	4.54%	15.20%	13.17%
Russell 2000	0.30%	0.90%	23.10%	16.01%

Source: Bloomberg

Fixed Income Index	Month-to-Date	Year-to-Date	12-Month
U.S. Broad Market	0.07%	8.87%	10.00%
U.S. Treasury	–0.17%	7.28%	8.73%
U.S. Mortgages	0.13%	6.20%	7.37%
Municipal Bond	0.30%	7.53%	8.32%

Source: Morningstar Direct

What to Look Forward To
We started the week with Monday’s release of the National Association of Home Builders Housing Market Index for December. Home builder confidence blew away expectations, with the index rising from 70 in November to 76 in December, against forecasts for a modest increase to 71. This is a 20-year high for the index, which is a very impressive turnaround considering home builder confidence hit a multiyear low of 56 in December 2018. This year, home builder sentiment has steadily improved, as low mortgage rates and high consumer confidence levels have been driving more interest in newly built homes. Builders have been happy to meet this demand by investing in and building new housing stock. Looking forward, increased home builder confidence should support additional construction as we head into the new year.

Speaking of new construction, on Tuesday, November’s building permits and housing starts reports are set to be released. Economists are forecasting a decline in building permits but a 2.1 percent increase in housing starts. Such a result in housing starts would bring that indicator to its second-highest monthly level since 2007, as home builders have been willing and able to meet buyer demand for new home construction. New home supply remains constrained in certain markets, so an increase would be a positive development for the housing market.

Tuesday will also see the release of November’s industrial production report. Production is set to show 0.8 percent monthly growth, following a 0.8 percent decline in October that was largely due to the General Motors strike and an associated plunge in auto production. Manufacturing output is also expected to bounce back from the October slowdown, with 0.8 percent growth expected. As we finish out the year, a rebound following the slowdown in September and October would help calm concerns over a broader extended decline in industrial production. Despite November’s anticipated rebound, slowing global demand is likely to put a damper on industrial production to start off 2020.

On Thursday, we’ll get a direct look at home buyer demand, with the release of November’s existing home sales report. Sales of existing homes are expected to decline from 5.46 million in October to 5.45 million in November. But even so, a decline would still represent 9 percent growth on a year-over-year basis. This result would mark the fifth straight month of year-over-year improvements in existing home sales, indicating the slowdown we saw at the end of 2018 is well behind us. Housing growth has been a bright spot in the ongoing expansion. Continued strength here would bode well for overall economic growth for the quarter.

Friday will see the release of November’s personal income and personal spending reports. Economists expect personal income to increase by 0.3 percent during the month, while spending is set to increase by 0.4 percent. The forecast for growth is encouraging, given October’s report showing income remaining surprisingly flat for the month. Spending has been strong this year; if the estimates are accurate, November’s report will mark the ninth straight month of spending growth. As long as personal income and spending numbers continue to be healthy, overall economic growth should remain positive even if its pace has slowed a bit.

Finally, we’ll finish the week with Friday’s release of the second and final reading of the University of Michigan consumer confidence survey for December. The index is expected to remain unchanged from the month’s first estimate. The preliminary estimate of 99.2 was higher than the initial forecast of 97, as a better-than-expected November jobs report and equity markets near all-time highs continue to support consumer confidence. If the index remains unchanged, this would mark the fourth straight month of increasing consumer sentiment, following a surprising fall to a two-year low in August. Consumer confidence supports additional spending growth, so an improvement in December would be quite welcome.

Disclosures: Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor’s. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index. The Bloomberg Barclays US Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The U.S. Treasury Index is based on the auctions of U.S. Treasury bills, or on the U.S. Treasury’s daily yield curve. The Bloomberg Barclays US Mortgage Backed Securities (MBS) Index is an unmanaged market value-weighted index of 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC), and balloon mortgages with fixed-rate coupons. The Bloomberg Barclays US Municipal Index includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than 2 years) selected from issues larger than $50 million.

Mark Gallagher is a financial advisor located at Gallagher Financial Services at 2586 East 7th Ave. Suite #304, North Saint Paul, MN 55109. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 651-774-8759 or at mark@markgallagher.com.

Authored by the Investment Research team at Commonwealth Financial Network.

Weekly Market Update, December 9, 2019

Posted on December 10, 2019 by Neal Gallagher

Presented by Mark Gallagher

General Market News
• Rates experienced an uptick in volatility last week. The 10-year Treasury yield went from 1.85 percent down to 1.69 percent and back up to 1.85 percent before opening on Monday at 1.82 percent. The 2-year opened at 1.60 percent, and the 30-year opened at 2.25 percent. It’s not surprising to see rates react in this manner, with mixed economic numbers and geopolitical concerns causing large swings in the markets.
• The three major U.S. indices were mixed last week, remaining relatively flat overall. The week began with increased U.S.-China tensions. The Chinese newspaper Global Times published an article reporting that Chinese trade officials would insist on the removal of the existing tariffs before moving ahead with the “phase one” deal. This was followed by a comment from President Trump that it may be better to wait until after the 2020 election to conclude a deal. While both of these statements increased existing tensions, trade officials from both sides reported that they continue to hold close talks about a deal.
• In other trade news, on Monday, President Trump announced that he would issue tariffs on steel and aluminum imports from Brazil and Argentina. France also came into the crosshairs, with the U.S. saying it would look into placing tariffs on French goods following France’s digital services tax on U.S. technology companies.
• Last week, OPEC+ agreed to raise its output cuts by 496,000 barrels for the first quarter of 2020, which would put total group production below that of the 2018 baseline. West Texas intermediate crude oil rose by more than 7 percent on the week, which led the energy sector to return more than 1.5 percent. Other top-performing sectors included consumer staples and health care. The worst performers were industrials, consumer discretionary, and technology.
• On Monday, the Institute for Supply Management (ISM) Manufacturing index for November was released. Manufacturer confidence declined, falling from 48.3 in October to 48.1 in November. Economists had previously forecast a slight increase to 49.2. This is a diffusion index, where values less than 50 indicate contraction, so this was a discouraging result. The index has measured below 50 for four straight months, as slowing global trade amid the ongoing U.S.-China trade war continues to negatively affect manufacturer confidence.
• Wednesday saw the release of the ISM Nonmanufacturing index, which also declined unexpectedly. This measure of service sector confidence fell from 54.7 in October to 53.9 in November. Last month’s declines in both manufacturer and nonmanufacturer confidence leave the combined index of business confidence at levels that indicate low-single-digit gross domestic product (GDP) growth.
• On Friday, the November employment report came in much better than expected with 266,000 jobs added, against expectations for 180,000. October’s figure was also revised higher. Roughly 40,000 jobs were due to striking GM employees returning to work. But even without this onetime boost, November’s headline jobs figure would be well above levels we’ve averaged this year. The underlying data was encouraging as well, with the surge in new jobs sending the unemployment rate back down to 3.5 percent. Wage growth also came in better than expected, increasing by 3.1 percent on a year-over-year basis.
• Finally, we finished the week with the first estimate of the University of Michigan consumer sentiment survey. It increased from 96.8 in November to 99.2 in December, against expectations for a more modest increase to 97. This marks the fourth straight month that the index has increased, after hitting a two-year low in August. Improving consumer confidence helps support additional consumer spending, so this increase is quite welcome.

Equity Index	Week-to-Date	Month-to-Date	Year-to-Date	12-Month
S&P 500	0.21%	0.21%	27.90%	19.08%
Nasdaq Composite	–0.08%	–0.08%	31.81%	21.75%
DJIA	–0.06%	–0.06%	22.98%	15.06%
MSCI EAFE	0.38%	0.38%	19.23%	16.74%
MSCI Emerging Markets	0.88%	0.88%	11.53%	10.39%
Russell 2000	0.59%	0.59%	22.73%	12.22%

Source: Bloomberg

Fixed Income Index	Month-to-Date	Year-to-Date	12-Month
U.S. Broad Market	–0.22%	8.55%	9.82%
U.S. Treasury	–0.37%	7.06%	8.45%
U.S. Mortgages	–0.04%	6.01%	7.34%
Municipal Bond	0.03%	7.24%	7.77%

Source: Morningstar Direct

What to Look Forward To
Wednesday will see the release of the Consumer Price Index for November. Consumer inflation is expected to increase by 0.2 percent for the month, which would bring annual inflation up to 2 percent. Core inflation is also expected to show 0.2 percent monthly growth, with annual core inflation set to remain unchanged at 2.3 percent. The tariffs imposed on consumer goods from China in September have not had much of an effect on consumer prices, as slowing economic growth has put downward pressure on prices.

The Federal Open Market Committee (FOMC) will be meeting on Tuesday and Wednesday, and the FOMC rate decision will be released Wednesday afternoon. Economists expect the Federal Reserve (Fed) to leave interest rates unchanged, breaking a streak of three straight meetings with a rate cut. Despite the expectation for unchanged rates, there will still be plenty to pay attention to. Fed Chair Jerome Powell is scheduled to hold a press conference after the meeting, where he will likely discuss the Fed’s updated outlook. Market participants will be widely monitoring Powell’s speech for any hints of future policy moves.

On Thursday, we’ll get a look at November’s Producer Price Index. As was the case with consumer prices, economists expect 0.2 percent monthly growth for headline and core producer prices. On a year-over-year basis, headline inflation is set to increase by 1.2 percent, and core inflation is expected to show 1.7 percent growth. Inflation has been largely muted this year and sits below the Fed’s stated 2 percent target.

We’ll finish the week with Friday’s release of November’s retail sales report. Sales are expected to show 0.4 percent monthly growth, following a solid 0.3 percent increase in October. Core retail sales, which strip out the impact of volatile automobile and gas purchases, are also expected to show 0.4 percent growth, which would be the best result since August. Consumer spending has been the major driver of economic growth this year. So, this anticipated acceleration as we head into the busy holiday season would be very encouraging.

Authored by the Investment Research team at Commonwealth Financial Network.

Weekly Market Update, December 2, 2019

Posted on December 5, 2019 by Neal Gallagher

Presented by Mark Gallagher

General Market News
• The 10-year Treasury yield finished last week unchanged at 1.78 percent and opened at 1.83 percent on Monday. The 30-year also opened the week higher, at 2.27 percent. The Treasury yield curve ended November inverted, with the 1-month yield of 1.62 percent higher than the 3-year yield of 1.61 percent.
• The three major domestic indices were all up last week. The move higher came on the back of easing U.S.-China trade tensions. On Tuesday, U.S. trade negotiators spoke by phone with Chinese officials, with China’s Ministry of Commerce stating that they had “reached a consensus on properly resolving relevant issues.” This was followed by a statement from President Trump that the U.S. was in the “final throes” of making a deal with China. In addition, third-quarter gross domestic product growth was revised up to 2.1 percent from the 1.9 percent reported in October.
• Last week, the three top-performing sectors were consumer discretionary, technology, and REITs. The three worst-performing sectors included energy, utilities, and industrials.
• On Tuesday, October’s new home sales report was released. Sales of new homes came in better than expected, with 733,000 sales against expectations for 705,000. September’s sales were also revised upward, from an original estimate of 701,000 to 738,000. This result pushed new home sales to their highest level since July 2007, as low mortgage rates continue to drive additional home buyers into the market.
• Also on Tuesday, the Conference Board Consumer Confidence Index for November was released. Unfortunately, confidence came in worse than expected, falling from 126.1 in October to 125.5 in November, against expectations for a modest increase to 127. This marks the fourth straight month of declines for the index, which is disappointing given last month’s strong equity market performance and better-than-expected jobs report. There was some good news in the release, however, as the subcomponent of the index that measures future expectations increased from 94.5 to 97.9, indicating that there may be some room for optimism going forward. Despite the improvement to the expectations index, this is a concerning report as we enter the important holiday shopping season.
• On Wednesday, we had some better-than-expected news with the release of the October durable goods orders report. Durable goods orders grew by 0.6 percent during the month, which was much better than the 0.9 percent decline that economists forecasted. Core demand was equally strong, as core durable goods orders that strip out transportation also grew by 0.6 percent in October, despite the GM strike. This is encouraging, as it shows that business owners are willing to invest despite continued uncertainty from the U.S.-China trade war. Looking forward, with the GM strike well behind us and potential for a “phase one” trade deal between the US and China, we might see increased business investment to finish out the year.
• Wednesday also saw the release of October’s personal income and personal spending reports. Economists expected 0.3 percent growth for both spending and income, and spending grew by the expected 0.3 percent. Income remained flat for the month, however. Income growth was muted in part by falling interest due to lower rates and declining farmer subsidies, so this disappointing month is not a major concern for now.

Equity Index	Week-to-Date	Month-to-Date	Year-to-Date	12-Month
S&P 500	1.04%	3.63%	27.63%	16.85%
Nasdaq Composite	1.72%	4.65%	31.93%	20.21%
DJIA	0.75%	4.11%	23.05%	13.36%
MSCI EAFE	0.52%	1.16%	18.89%	13.71%
MSCI Emerging Markets	–0.80%	–0.13%	10.52%	8.01%
Russell 2000	2.27%	4.10%	21.97%	7.71%

Source: Bloomberg

Fixed Income Index	Month-to-Date	Year-to-Date	12-Month
U.S. Broad Market	–0.05%	8.79%	10.85%
U.S. Treasury	–0.30%	7.46%	9.87%
U.S. Mortgages	0.08%	6.06%	8.03%
Municipal Bond	0.25%	7.21%	8.65%

Source: Morningstar Direct

What to Look Forward To
On Monday, the Institute for Supply Management (ISM) Manufacturing index was released. This gauge of manufacturer confidence was expected to increase from 48.3 in October to 49.2 in November. Instead, it declined further to 48.1. This is a diffusion index, where values below 50 indicate contraction. So, the decline keeps this section of the economy in a slowdown. Declines in inventories and new orders, as well as employment expectations, weighed on the reading.

Wednesday will see the release of the ISM Nonmanufacturing index, which is expected to show a modest decline from 54.7 in October to 54.5 in November. As is the case with the manufacturing index, this is a diffusion index. Here, values above 50 indicate expansion. While a decline would be disappointing, the index is expected to remain in expansionary territory for November. Accordingly, there’s no major cause for concern for the time being. The anticipated decline would leave the index at levels that have historically indicated slow overall economic growth.

On Thursday, October’s international trade report is set to be released. Economists believe that the trade deficit will narrow from $52.5 billion in September to $48.4 billion in October. Such a result would represent the smallest monthly deficit since June 2018. Previously released advance trade data showed a drop in both exports and imports of goods during October, with a larger decline in imports causing a shrinking deficit in the trade of goods. Some of the slowdown in imports can be attributed to the GM strike, so November’s data may rebound given the end of the strike. Looking forward, exports are not expected to grow meaningfully in the short term unless the U.S.-China trade talks reveal progress.

On Friday, we’ll get the November employment report. Expectations are for 190,000 new jobs, which would be a strong showing following October’s addition of 128,000 jobs. The unemployment rate is expected to remain flat at 3.6 percent, while average hourly earnings growth should increase to 0.3 percent on a month-over-month basis. Despite the expected acceleration in job growth in November, the pace of expansion has slowed noticeably from 2018 levels.

Finally, we’ll finish the week with the first estimate of the University of Michigan consumer confidence survey, which is expected to increase from 96.8 in November to 97 in December. Unlike the Conference Board measure of confidence, this index has been steadily improving for the past few months after hitting a two-year low of 89.8 in August. November’s result would mark the fourth straight month of increasing confidence. Even so, the index will still sit below recent highs set in 2018.

Authored by the Investment Research team at Commonwealth Financial Network.

Weekly Market Update, November 18, 2019

Posted on November 21, 2019 by Neal Gallagher

Presented by Mark Gallagher

General Market News
• U.S. rates came down on a holiday-shortened week. On Monday, the 10-year Treasury yield opened at 1.84 percent, dropping from last week’s high of 1.97 percent. The 30-year reached a recent high of 2.43 percent and opened Monday at 2.32 percent. The 2-year moved from a high of 1.67 percent to 1.60 percent.
• Domestic markets moved higher last week, with international markets remaining flat and emerging markets moving down. The recent rally showed signs of investors rotating away from cyclicals and into defensive. The focus for investors continues to be the “phase one” deal between the U.S. and China.
• On Tuesday, the Wall Street Journal reported that the U.S. and China were having issues with the intellectual property protection and enforcement components of the potential deal. This report came after President Trump’s statement on November 8 that he has not agreed to roll back tariffs, although Larry Kudlow, director of the National Economic Council, suggested the two sides are getting close to a deal.
• The top-performing sectors on the week were health care, REITs, and utilities. The worst-performing sectors were energy, financials, discretionary, materials, and financials.
• On Wednesday, the Consumer Price Index (CPI) for October was released. Consumer inflation came in slightly higher than expected, with prices rising 0.4 percent for the month against expectations for a 0.3 percent increase. This brought headline inflation up to 1.8 percent for the year, driven by rising gas prices. Core CPI, which strips out the impact of energy and food prices, increased by only 0.2 percent for the month. Year-over-year core CPI growth fell from 2.4 percent in September to 2.3 percent in October. Overall, this report showed that consumer prices have not been feeling upward pressure from the additional tariffs on Chinese goods that took effect in September.
• Thursday saw the release of the Producer Price Index (PPI) for October. As was the case with consumer inflation, rising gas prices drove headline PPI growth to 0.4 percent, and core PPI saw a 0.3 percent increase. On a year-over-year basis, headline PPI fell to 1.1 percent, down from 1.4 percent in September. Core inflation increased by 1.6 percent over the past year, down from the 2 percent rate in September. Once again, it appears that despite the effect of increasing gas prices, core inflation pressure remains muted.
• On Friday, we finished the week with the release of the October retail sales report. Headline retail sales increased by 0.3 percent, against expectations for more modest 0.2 percent growth. This result was partially due to increased gas prices, as core retail sales grew only 0.1 percent during the month. Despite the miss on core retail sales growth, this was still a positive report, as both headline and core sales returned to growth following disappointing declines in September.

Equity Index	Week-to-Date	Month-to-Date	Year-to-Date	12-Month
S&P 500	0.94%	2.14%	26.59%	17.74%
Nasdaq Composite	0.80%	2.61%	29.43%	21.17%
DJIA	1.24%	2.63%	22.85%	13.81%
MSCI EAFE	0.10%	0.47%	18.66%	12.23%
MSCI Emerging Markets	–1.49%	0.00%	11.17%	10.85%
Russell 2000	–0.11%	1.60%	20.52%	7.64%

Source: Bloomberg

Fixed Income Index	Month-to-Date	Year-to-Date	12-Month
U.S. Broad Market	–0.49%	8.31%	10.79%
U.S. Treasury	–0.78%	6.95%	9.86%
U.S. Mortgages	–0.01%	5.97%	8.59%
Municipal Bond	–0.28%	6.64%	8.91%

Source: Morningstar Direct

What to Look Forward To
The week began with Monday’s release of the National Association of Home Builders Housing Market Index, which declined slightly from 71 in October to 70 in November. This decline breaks a four-month streak of increased home builder confidence. Despite the modest pullback in November, home builder confidence still sits near post-recession highs, as cheap borrowing costs continue to drive an uptick in potential buyers. The portion of the index that focuses on future sales increased in November, which indicates that home builders are more optimistic about the next six months for the housing market. Overall, while the decline this month was slightly disappointing, home builder confidence remains high, so there is no immediate cause for concern.

Speaking of home builders, with Tuesday’s release of October’s building permits and housing starts reports, we’ll get a chance to see if the increased confidence has led to faster housing growth. Permits are expected to decline modestly, while starts are slated to increase by a healthy 4.9 percent. These measures of new home construction can be volatile on a month-to-month basis. But over the course of the year, housing starts have trended up. Material costs have come down from 2018 highs, while buyer demand remains strong.

On Wednesday, the Federal Open Market Committee minutes from the October meeting will be released. The committee voted to cut the federal funds rate by 25 basis points at this meeting, marking the third straight meeting with a rate cut. Recent comments from Federal Reserve (Fed) chairman Jerome Powell to Congress reiterated the Fed’s messaging that further rate cuts are unlikely unless a marked slowdown in economic growth occurs. Economists are looking for any hints in the October minutes as to what type of weakness would lead the Fed to reevaluate that stance. We might also get some interesting commentary regarding the recent volatility in the overnight repurchase market and how the Fed is reacting to this development.

Thursday will see the release of October’s existing home sales report. Home sales are expected to grow by 2.1 percent in October, rebounding from a decline of 2.2 percent in September. This result would mark the fourth straight month of year-over-year growth in existing home sales. Housing has been one of the major bright spots in the economy over the past few months, as the return to year-over-year growth in existing home sales demonstrates.

Finally, we’ll finish out the week with the second and final reading of the University of Michigan consumer confidence survey for November. Economists expect the index to increase slightly, from 95.7 at the start of the month to 95.8. Continued equity market strength and a better-than-expected jobs report helped boost confidence for the second straight month, following the surprising decline to a three-year low in August. Going forward, higher consumer confidence would be quite welcome, as high confidence levels should help support faster consumer spending growth.