Stocks Hold All-Time Highs…

U.S. stocks finished the regular trading session fairly flat, though the Dow broke through the 23,000 mark intraday as market participants waded through a flood of corporate earnings and economic reports. Treasury yields were little changed and the U.S. dollar rose as uncertainty and speculation in regard to who will soon lead the Federal Reserve remains. In economic news, homebuilder sentiment and industrial production rebounded, while import prices rose. Gold was lower and crude oil prices inched higher.

The Dow Jones Industrial Average (DJIA) increased 40 points (0.2%) to 22,997, the S&P 500 Index added 2 points (0.1%) to 2,559, and the NASDAQ Composite was nearly unchanged at 6,624. In moderate-to-light volume, 692 million shares were traded on the NYSE and 1.6 billion shares changed hands on the NASDAQ. WTI crude oil ticked $0.01 higher to $51.88 per barrel and wholesale gasoline also increased $0.01 to $1.63 per gallon. Elsewhere, the Bloomberg gold spot price lost $9.69 to $1,286.10 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.2% higher at 93.51.

The National Association of Home Builders (NAHB) Housing Market Index showed homebuilder sentiment this month rose to a five-month high of 68, versus the Bloomberg forecast calling for it to match September’s unrevised 64 level. The index sits well above the 50 mark, the point of separation for good versus poor conditions. The NAHB said the report showed homebuilders are rebounding from the initial shock of the hurricanes, but need to be mindful of long-term repercussions from the storms, such as intensified material price increases and labor shortages.

Housing construction will come into focus tomorrow, with the economic calendar delivering the September housing starts and building permits report. Starts are projected to dip 0.4% month-over-month (m/m) to an annual rate of 1,175,000 units and permits are forecasted to decline 2.1% to a rate of 1,245,000 units. MBA’s mortgage applications report tomorrow will also give us a look at home lending activity.

Industrial production rose 0.3% month-over-month (m/m) in September, matching estimates, after August’s upwardly revised 0.7% decrease, which snapped a six-month string of gains. Manufacturing and mining production both ticked higher, while utilities output rose solidly. Capacity utilization rose to 76.0% from the prior month’s downwardly revised 75.8% rate, and compared to forecasts of 76.2%. Capacity utilization is 3.9 percentage points below its long-run average. The Federal Reserve noted the continued effects of the hurricanes held down growth in total production. Tomorrow, the Fed will give us a look at national business activity in the form of its Beige Book, a tool it will use to prepare for its next two-day monetary policy meeting scheduled to end November 1st.

The Import Price Index gained 0.7% m/m for September, above projections to match August’s unrevised 0.6% gain. Compared to last year, prices were up 2.7%, topping forecasts of a 2.6% gain and compared to August’s unrevised 2.1% increase.

Treasuries finished mixed but little changed, with the yield on the 2-year note increasing 1 basis point to 1.55%, the yield on the 10-year note flat at 2.30% and the 30-year bond rate dipping 1 basis point to 2.81%. The U.S. dollar gained ground on uncertainty regarding who will be the next Fed Chief amid the backdrop of signs that inflation may be nudging higher and global economic growth remains steady. Also, the markets continued to grapple with global political uncertainty and the potential for U.S. tax reform.

Schwab Center for Financial Research – Market Analysis Group

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