Markets Notch Gains Amid a Flurry of Data and Events.

U.S. equities finished out the week higher, getting a boost from a 13-year high in consumer sentiment and solid retail sales. Technology issues caught a draft from HP’s favorable guidance, while healthcare issues came under pressure as the Trump administration cut cost-sharing subsidies. Treasury yields were lower on cooler-than-expected inflation data and the U.S. dollar finished nearly unchanged, while crude oil prices moved higher in the wake of President Trump’s decision not to certify the Iran nuclear deal.

The Dow Jones Industrial Average (DJIA) increased 32 points (0.1%) to 22,872, the S&P 500 Index added 2 points (0.1%) to 2,553, and the Nasdaq Composite gained 14 points (0.2%) to 6,606. In moderate volume, 769 million shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq. WTI crude oil increased $0.85 to $51.45 per barrel and wholesale gasoline was $0.04 higher at $1.62 per gallon. Elsewhere, the Bloomberg gold spot price added $9.74 to $1,303.46 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was flat at 93.08. Markets were higher for the week, as the DJIA gained 0.4%, the S&P 500 Index added 0.3% and the Nasdaq Composite increased 0.2%.

The healthcare sector saw some choppiness, led by hospital and managed-care stocks, after President Trump and his administration announced that they will cut off Affordable Care Act cost-sharing subsidies.

Advance retail sales for September rose 1.6% month-over-month (m/m), compared to the Bloomberg forecast of a 1.7% gain and compared to August’s positively-revised 0.1% decline. Last month’s sales ex-autos were up by 1.0% m/m, versus expectations of a 0.9% gain, and following the favorably revised 0.5% increase seen in the previous month. Sales ex-autos and gas rose 0.5% m/m, compared to estimates of a 0.4% rise, and versus August’s upwardly revised 0.1% gain. The retail sales control group, a figure used to help calculate GDP, grew 0.4%, matching projections, and the prior month’s positively revised flat reading. Auto and gas sales rose solidly, along with building materials, while sales of food and beverages, clothing, at restaurants and online all moved higher. Electronics and appliances, furniture, health and personal care, and sporting goods sales categories were down.

The Consumer Price Index (CPI) gained 0.5% m/m in September, versus estimates calling for a 0.6% gain, while August’s 0.4% rise was unrevised. The core rate, which strips out food and energy, was up 0.1% m/m, versus expectations for it to match August’s unrevised 0.2% rise. Y/Y, prices were 2.2% higher for the headline rate, below forecasts of a 2.3% rise, while the core rate was up 1.7%, south of projections of a 1.8% increase. August y/y figures showed unrevised 1.9% and 1.7% rises for the headline and core rates, respectively.

The preliminary University of Michigan Consumer Sentiment Index surged to a 13-year high of 101.1 in October from the prior month’s 95.1 level, and compared to expectations for it to dip to 95.0. The current economic conditions and expectations components of the report both jumped. The 1-year inflation forecast fell to 2.3% from September’s 2.7% rate, while the 5-10 year inflation outlook dipped to 2.4% from 2.5%.

Business inventories rose 0.7% m/m in August, in line with forecasts, and versus July’s upwardly revised 0.3% increase. U.S. stocks posted a fourth-straight weekly gain as Q4 continued to roll on, with data fostering continued global economic optimism to support sentiment and overshadow festering global political and monetary policy uncertainties. Treasury yields and the U.S. dollar slipped after recent rallies on a cooler-than-expected read on consumer price inflation, pared optimism as the markets grapple with the long road to tax reform, and volatility across the pond on a Brexit stalemate and lingering Spanish political uncertainty. As such, real estate and utilities led to the upside, while financials were hampered.

Schwab Center for Financial Research – Market Analysis Group

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