Week in Review

Last week’s economic data generally pointed to a resilient economy entering the fourth quarter. Business activity and labor market conditions remained supportive of growth, although housing activity remained weak and persistent price pressures continued to be a concern.

September housing starts fell 5.2% to an annualized pace of 1.221 million, below expectations of 1.300 million. Building permits were little changed at 1.400 million, as elevated mortgage rates, construction costs, and affordability constraints continued to weigh on housing activity.

Labor market conditions remained stable, with initial jobless claims declining to 194,000 from 199,000 the previous week. Regional manufacturing activity showed some moderation, with the Kansas City Fed Manufacturing Composite Index declining to 11 in October from 14 in September as growth in both durable and nondurable manufacturing slowed. However, expectations for future activity improved to 22 from 19, suggesting manufacturers remained relatively optimistic about the months ahead.

Business activity remained strong entering the fourth quarter, despite some moderation in the services sector. October Manufacturing Purchasing Managers’ Index (PMI) increased to 56.0 from 55.9, while Services PMI declined to 57.9 from 58.8, bringing Composite PMI down to 57.6 from 58.4. The overall reading remained firmly in expansion territory, with new orders and hiring continuing to improve. However, selling prices rose at their fastest pace since August 2022 as businesses passed higher input costs on to customers, adding to concerns that inflationary pressures remain persistent.

The October University of Michigan Consumer Sentiment Index remained subdued at 48.0, little changed from September. The Current Conditions reading fell to 46.7 from 50.9 but came in above expectations of 44.7, suggesting conditions weakened but not as much as anticipated. Year-ahead inflation expectations also increased to 4.7% from 4.6%, reinforcing concerns that higher prices continue to weigh on household confidence.

Economic and Capital Markets Dashboard

Week Ahead

The upcoming week features a busy economic calendar as investors assess the outlook for growth, inflation, and monetary policy heading into the final months of the year. Recent data have continued to point to resilient economic activity, although persistent price pressures remain a concern and could complicate the path forward for monetary policy.

Tuesday’s September durable goods orders will provide an updated look at business investment and demand for manufactured goods. Consumer confidence and new home sales will also offer further perspective on household sentiment and the housing market, where elevated borrowing costs and affordability constraints remain headwinds.

Wednesday’s Federal Open Market Committee meeting will be the week’s primary focus. Investors will closely monitor the Fed’s policy decision and accompanying statement for guidance on how officials are balancing persistent inflation against the broader growth and labor market outlook.

Thursday will bring several important updates on growth and inflation, led by the advanced estimate of third quarter gross domestic product (GDP) and September Personal Consumption Expenditures (PCE) inflation. GDP will provide an updated assessment of economic growth, while core PCE, the Fed’s preferred measure of underlying inflation, will be closely watched for signs that price pressures remain persistent. Personal spending and weekly initial jobless claims will provide additional perspective on consumer activity and labor market conditions.

Friday’s Chicago PMI will provide an updated look at regional manufacturing activity, with attention focused on whether recent strength can continue. The third-quarter Employment Cost Index will also provide further insight into wage pressures and their potential impact on inflation. Taken together, the week’s data should provide a clearer picture of economic momentum and the monetary policy outlook through the end of the year.

Disclosures and Definitions

Economic Indicators:

1. CPI: Consumer Price Index measures the average change in prices paid by consumers for goods and services over time. Source: Bureau of Labor Statistics.
2. Core CPI: Core Consumer Price Index excludes food and energy prices to provide a clearer picture of long-term inflation trends. Source: Bureau of Labor Statistics.
3. PPI: Producer Price Index measures the average change in selling prices received by domestic producers for their output. Source: Bureau of Labor Statistics.
4. Core PPI: Core Producer Price Index excludes food and energy prices to provide a clearer picture of long-term inflation trends. Source: Bureau of Labor Statistics.
5. PCE: Personal Consumption Expenditures measure the average change in prices paid by consumers for goods and services. Source: Bureau of Economic Analysis.
6. Core PCE: Core Personal Consumption Expenditures exclude food and energy prices to provide a clearer picture of long-term inflation trends. Source: Bureau of Economic Analysis.
7. Industrial Production: Measures the output of the industrial sector, including manufacturing, mining, and utilities. Source: Federal Reserve.
8. Mfg New Orders: Measures the value of new orders placed with manufacturers for durable and non-durable goods. Source: Census Bureau.
9. Durable New Orders: Measures the value of new orders placed with manufacturers of durable goods. Source: Census Bureau.
10. Durable Inventories: Measures the value of inventories held by manufacturers for durable goods. Source: Census Bureau.
11. Consumer Confidence (CB, 1985=100): Measures the degree of optimism that consumers feel about the overall state of the economy and their personal financial situation. Source: Conference Board.
12. ISM Manufacturing Report: Measures the economic health of the manufacturing sector based on surveys of purchasing managers. Source: Institute for Supply Management.
13. ISM Non-Manufacturing Report: Measures the economic health of the non-manufacturing sector based on surveys of purchasing managers. Source: Institute for Supply Management.
14. Leading Economic Index: Measures overall economic activity and predicts future economic trends. Source: Conference Board.
15. Building Permits (Mil. of Units, saar): Measures the number of new residential building permits issued. Source: Census Bureau.
16. Housing Starts (Mil. of Units, saar): Measures the number of new residential construction projects that have begun. Source: Census Bureau.
17. New Home Sales (Mil. of Units, saar): Measures the number of newly constructed homes sold. Source: Census Bureau.
18. SA: Seasonally adjusted.
19. SAAR: Seasonally adjusted annual rate.

Market Indices & Indicators:

1. S&P 500: A market-capitalization-weighted index of 500 leading publicly traded companies in the U.S., widely regarded as one of the best gauges of large U.S. stocks and the stock market overall.
2. Dow Jones 30: Also known as the Dow Jones Industrial Average, it tracks the share price performance of 30 large, publicly traded U.S. companies, serving as a barometer of the stock market and economy.
3. NASDAQ: The world's first electronic stock exchange, primarily listing technology giants and operating 29 markets globally.
4. Russell 1000 Growth: Measures the performance of large-cap growth segment of the U.S. equity universe, including companies with higher price-to-book ratios and growth metrics.
5. Russell 1000 Value: Measures the performance of large-cap value segment of the U.S. equity universe, including companies with lower price-to-book ratios and growth metrics.
6. Russell 2000: A market index composed of 2,000 small-cap companies, widely used as a benchmark for small-cap mutual funds.
7. Wilshire 5000: A market-capitalization-weighted index capturing the performance of all American stocks actively traded in the U.S., representing the broadest measure of the U.S. stock market.
8. MSCI EAFE Index: An equity index capturing large and mid-cap representation across developed markets countries around the world, excluding the U.S. and Canada.
9. MSCI Emerging Market Index: Captures large and mid-cap representation across emerging markets countries, covering approximately 85% of the free float-adjusted market capitalization in each country.
10. VIX: The CBOE Volatility Index measures the market’s expectations for volatility over the coming 30 days, often referred to as the "fear gauge."
11. FTSE NAREIT All Equity REITs: Measures the performance of all publicly traded equity real estate investment trusts (REITs) listed in the U.S., excluding mortgage REITs.
12. S&P U.S. Aggregate Bond Index: Represents the performance of the U.S. investment-grade bond market, including government, corporate, mortgage-backed, and asset-backed securities.
13. 3-Month T-bill Yield (%): The yield on U.S. Treasury bills with a maturity of three months, reflecting short-term interest rates.
14. 10-Year Treasury Yield (%): The yield on U.S. Treasury bonds with a maturity of ten years, reflecting long-term interest rates.
15. 10Y-2Y Treasury Spread (%): The difference between the yields on 10-year and 2-year U.S. Treasury bonds, often used as an indicator of economic expectations.
16. WTI Crude ($/bl): The price per barrel of West Texas Intermediate crude oil, a benchmark for U.S. oil prices.
17. Gold ($/Troy Oz): The price per troy ounce of gold, a standard measure for gold prices.
18. Bitcoin: A decentralized digital currency without a central bank or single administrator, which can be sent from user to user on the peer-to-peer bitcoin network.

This content was developed by Cambridge and BridgePort from sources believed to be reliable. This content is provided for informational purposes only and should not be construed or acted upon as individualized investment advice. It should not be considered a recommendation or solicitation. Information is subject to change. Any forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice. The information in this material is not intended as tax or legal advice.

Investing involves risk. Depending on the different types of investments there may be varying degrees of risk. Socially responsible investing does not guarantee any amount of success. Clients and prospective clients should be prepared to bear investment loss including loss of original principal. Indices mentioned are unmanaged and cannot be invested into directly. Past performance is not a guarantee of future results.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange.

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