Daily Market Color

Red October Continues for Stocks


New Week, Same Volatility

US stocks were unable to hold onto the gains experienced in the early portion of the trading session, as the tech and industrial sectors plunged with continued concerns over higher interest rates and trade war uncertainty.  The Nasdaq finished the lowest among the major indices, falling into correction territory (-1.63%), while the DJIA (-0.99%) and S&P 500 (-0.66%) posted more modest losses, helped in part by strength in financials.  US Treasury markets similarly operated in risk-off fashion in the morning before rallying into the close.  Yields/swap rates ultimately finished near unchanged on the day, with the 10-year note yield remaining just over 3.08%.  In commodity markets, crude oil futures declined again today as global supply concerns continue to hold down prices.  WTI crude settled 0.75% lower to $67/barrel and is on pace for its worst month in more than two years.



Spending, Inflation Remain Steady

The Commerce Department’s report on personal income and consumer spending for September headlined today’s economic data releases.  Detailed in the report, consumer spending rose a robust 0.4% (matching expectations), led by purchases in the motor vehicle and healthcare services sectors.  Separately, personal income ticked 0.2% higher, missing median forecasts of +0.4%.  Consumer price data within the report fell mostly in line with the sentiment voiced by several Fed members last week in detailing increases in household spending and wages without an overheating of consumer price.  The core PCE price index (Fed’s preferred inflation measure) rose 0.2% in September after a flat reading in August.  Compared to a year earlier, the gauge of core prices climbed 2.0% — matching the Fed’s inflation target.



It’s Al-RIGHT in Brazil

This weekend far-right candidate Jair Bolsonaro secured his victory in the Brazilian presidential election after capturing 55% of the popular vote.  Similar to many of the recent elections around the world, Bolsonaro benefitted from the wave of populism driven by voters seeking real change within their respective nations.  Bolsonaro has drawn comparisons to President Trump through a number of polarizing comments he made along the campaign trail, the tail-end of which has been spent at his house in Rio de Janeiro as he recovers from a near-fatal stabbing.  He has also been viewed as a business-friendly leader, and in a time where global stocks have been unable to find their footing, equities in Brazil have climbed more than 10% since mid-September.



End of an Era

German Chancellor Angela Merkel shook up European markets today with the announcement that she would not be running for the chairwoman of her Christian Democrats (CDU) party come the next round of elections in 2021.  Merkel has served as the chairwoman of the CDU since 2000 and has been chancellor of Germany for the past 15 years.  The announcement came following Sunday’s nationwide poll in Hesse, Germany, where the CDU’s popularity dwindled to historical lows, albeit still the leading party in the race.  “As a chairwoman and chancellor I bear the responsibility for everything, for success and for failure. There was a signal that this cannot go on. The image of the government is unacceptable,” Merkel stated in the press conference.  While she indicated that she plans to retire from politics in 2021, several economists believe she may be forced out as chancellor much sooner, leaving several questions as to the next in line.  The US dollar edged 0.2% higher against the euro following the news.


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