Stocks opened lower this morning (Dow -44 pts; SPX -.12%). Tech, utilities and financials are higher while energy and materials sectors continue to lag. The VIX Index is trading at 15.5. Commodities are mostly lower in early trading. WTI crude oil edged down to just below $80/barrel. Gold is also lower as the dollar strengthens. The Powershares US Dollar Index Bullish Fund (UUP) is up 9% since the middle of the year. Bonds are modestly lower as rates tick higher. The 5-year Treasury yield has shot up to 1.65% from 1.34% in the middle of October. The 10-year is up to 2.36%.
ISM’s Manufacturing Index shot up to 59.0 in October from 56.6 in the prior month. Results were far stronger than anticipated and represent a 3+ year high. We saw improvement in all the major sub-components of the index: employment, production, new orders, backlogs. This is probably the most closely watched survey of manufacturing business activity in the US. Results seem to suggest US factories are responding to improving domestic demand and overcoming slower economic growth overseas. We just learned that the Eurozone’s manufacturing PMI ticked up to 50.6 in October and China’s (official) PMI fell a bit to 50.8 last month. Note that all three indexes use 50.0 as the dividing line between business expansion and contraction.
CNBC reports that for all home sales in the US this year, the share of first time home buyers share has dropped to 33% (vs. 38% last year). The long term average is about 40%. It looks like the rapid rise in home prices we’ve seen over the last couple of years has hurt affordability. Home prices have been trending up by roughly 8-12% whereas wage growth has been stagnant at 2-3%.
Bloomberg reports the Republican Party is poised to achieve gains in the mid-term elections tomorrow. It is possible that Republicans could pick up an additional 6 seats in the US Senate and achieve control there, but some races are too close to call. It does look like several Senate seats will flip Republican: South Dakota, Montana and West Virginia. President Obama has been sidelined by very low approval ratings (41%), and has done very little campaigning for fellow Democrats. Republicans, however, are trying to turn the election into a referendum on the president.
MikesMarketUpdate 