Market Commentary: Earnings Reports Spur Market Momentum

Led by decent corporate earnings reports, the S&P 500 index powered to a new all-time high this week, closing at 1759.70, up 0.88%. Government bond yields continued their two-month descent, with the yield on the 10-year U.S. Treasury finishing the week at 2.51%, down .07%. Gold is regaining investor interest, with the yellow metal up 2.62%, closing the week at 1350.80.

Earnings season is underway with overall results holding up fairly well. With roughly half of all companies in the S&P 500 index having reported third quarter earnings, average growth has been 7%, a respectable showing.

Housing has been another economic bright spot, although the market has cooled a bit with the modest backup in interest rates experienced over the summer. September existing home sales are at a healthy 5.3 million annual rate and August home prices were up 8.5% from a year ago.On the economic front, this week saw the delayed release of the much-awaited September jobs report. Although the increase in nonfarm payrolls of 148,000 was below expectations, average hourly earnings increased at a 2.1% annual rate and the unemployment rate dropped a notch to 7.2%. The jobs market is definitely healing, albeit slowly, and with a moving average of weekly jobless claims on a visible downtrend, the outlook is continued improvement.

Durable goods orders for September were up a strong 3.7%, led by demand for aircraft. However, stripping out the volatile transportation segment, orders dropped by 0.1%.

Consumer sentiment fell to a 10-month low in October, with the University of Michigan survey dropping to 73.2. We suspect the political uncertainty surrounding the budget and debt ceiling had an effect here.

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