The third-quarter earnings season is in full swing, with more than 50 of the S&P 500 constituents reporting earnings on Thursday. Strong earnings continue to be a major catalyst behind the recent rally in equities, and the S&P 500 was once again higher by about 0.70% mid-week. Developments in Washington helped boost sentiment, with Democratic lawmakers paving the way for a House vote on the bipartisan infrastructure plan. On the data front, the Conference Board’s gauge of consumer confidence improved in October putting an end to three consecutive months of declines. For now, it appears that improving labor market prospects are outweighing concerns over higher inflation.

According to the Advance Economic Indicators Report, the goods trade deficit increased by $8.1 billion in September, much more than expected. Goods exports fell by 4.7% while goods imports increased by 0.5%. The decrease in exports was mostly concentrated in industrial supplies which declined by 9.9%.  New orders for durable goods decreased by less than expected, durable goods orders ex-transport increased in line with consensus expectations, and core capital goods orders and core capital goods shipments increased by more than expected. Separately, new home sales surged by 14% in September to the highest level since March. Next week, we get a Federal Open Market Committee rate decision. There will not be updated economic projections, but it is widely expected that a start to taper will be announced. In Frankfurt, the European Central Bank (ECB) meets next Thursday, which should solidify that the ECB is less hawkish than the Fed, though they have more acute issues with China trade and Russian energy supplies (Factor Investor). Interest rates moved lower this week, with the yield on the 10-year note trading around 1.56% mid-week.

Source: GSAM, Daily Upside, JPM, Factor Investor

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