Stock markets essentially flat despite strong economic data
North American stock markets were essentially flat this week despite the release of strong economic reports. All global stock markets however, saw positive returns for the month of October, following strong results in September.
Friday’s release of U.S. Gross Domestic Product (GDP) from the U.S. Commerce Department showed economic growth advanced at an annualized pace of 2% in the third quarter, up from the previous quarter and in line with expectations. As the broadest measure of economic growth, GDP also showed strength in personal consumption, which posted a 2.6% increase, its biggest gain in four years.
Business activity also rose in October in broad-based advances that showed businesses are reinvesting in equipment and technology. The Chicago Purchasing Managers Index, a survey of business conditions in the Chicago area, increased to 60.6 in October, bettering the 60.4 reading in the previous month, with anything over 50 signaling expansion.
Also this week, initial jobless claims fell sharply to 434,000, better-than-expected, and the lowest level in three months. Other healing looks to have begun in the housing sector, where new home sales were up 6.6% for September, significantly beating expectations, and existing home sales also beat estimates and were up 10% in September.
Third-quarter corporate profits released this week were mixed with 3M Co. and Avon guiding forecasts lower for full year earnings. Meanwhile, positive earnings results were seen at Microsoft, pharmaceutical giant Bayer AG. Hyundai Motor Company and Ford Motor Company. Automakers are among the manufacturers seeing an increase in sales and profits. Overall, corporate earnings continue to surprise to the upside, with more than 80% of S&P 500-listed companies reporting results so far exceeding forecast expectations.
Markets are looking ahead to next week’s U.S. mid-term elections and to the Federal Open Market Committee meeting where it is expected additional economic stimulus initiatives will be announced.
In other news this week:
Existing home sales beat estimates and were up 10% in September
Consumer confidence beat expectations but remains subdued, coming in at 50.2
Durable goods orders rose 3.3% in September
New home sales were up 6.6% for September to 307,000 units, beating expectations
