Increased Demand Pushes U.S. Home Prices Higher, Consumer Confidence Falls on Current Business Outlook

Both equity and bond markets absorbed minimal losses on the day after receiving mixed economic data to complement uninspiring earnings reports from select blue chips companies, most notably Caterpillar Inc., Home Depot, and 3M Co.  According to the S&P Corelogic Case-Shiller index, U.S. home prices rose 5.1% in August as increased demand due to continually low mortgage rates drove prices higher.  The index is currently approaching its record high set back in 2006 prior to the financial crisis.  Consumer confidence in October, however, slid 4.9 points to a 98.6 level, below median forecasts of 101.5.  After gains the previous two months, concerns over current employment and business conditions weighed on this month’s reading.    

The US dollar, after already gaining 3.6% in October, continues to climb against major global currencies as investors factor in a near 80% chance of a December rate hike (based on trading in Fed funds futures), reduced political risk associated with a Hillary Clinton presidency, and expectations of further stimulus enacted by other central banks around the world.  The dollar hit seven-month highs against the euro ($1.0851/euro) and Swiss franc (parity) to go along with the highest level in three months vs. the yen (104.87yen/$).  Additionally, China’s yuan set another record low dating back to when offshore trading was introduced in 2010, touching 6.79 yuan per dollar.

Crude oil prices slid further today after Vladimir Voronkov, Russia’s representative at OPEC, contradicted all past reporting that had pegged Russia as a participant in the future production freeze.  According to Interfax, Voronkov stated that output cuts aren’t “an option for us.”  The unexpected news comes two days after Iraqi oil officials requested that Iraq be exempt from OPEC’s production cap plan to be ironed out at the November meeting.

All three major US stock indexes finished down 0.3%-0.5%, while Treasury yields/swap rates are just below even on the day, with the yield on the 10-year note sitting at 1.75%.  WTI crude oil shed roughly 1.5% on the day to $49.80/barrel while Brent crude fell 1.65% to $50.60/barrel.