Robust Data Reveals Strength in Q3 Economy, Oil Plummets on OPEC Standoff

GDP, Consumer Data Provide Rosy Outlook  Painting a bright picture for the US economy, the revised third quarter GDP growth was reported at 3.2%, an upward revision to the 2.9% advance reading released last month.  The new figure represents the greatest quarterly rise in the past two years, exceeding median forecasts of 3%.  Consumer spending and residential investment served as the principal drivers behind the increase, with household purchases growing at a 2.8% annualized rate (expected 2.1%).  Predictions for fourth quarter GDP growth have been pegged at 3.6% by the Atlanta Fed.  Also displaying growth in the housing market, today the S&P Core Logic Case-Shiller index reported a 0.4% increase in US home prices across 20 major cities during the month of September.  Homes in the cities of Dallas and Tampa displayed the largest monthly appreciations.  Additional data released today included the Consumer Confidence Index, which presented a 107.1 reading, the highest level in nine years and significantly above expectations of 101.  Emphasis from the survey was placed on an increase in the number of respondents who indicated that jobs were plentiful in the current employment environment, a positive indication for consumer holiday spending.  The data was well-received by all three major US stock indices, which finished with gains of nearly 0.25% on the day.  Despite the strong data, bond prices marginally rose, shifting Treasury yields/swap rates down 1-2 bps across the curve.

Fed Official Confirms Economic Health
Speaking at an event in Washington earlier today, Federal Reserve Governor Jerome Powell acknowledged the strengthening of the US economy with respect to recent data.  “Incoming data show an economy that is growing at a healthy pace, with solid payroll job gains and inflation gradually moving up to 2 percent,” Powell said.  While he did express his belief that the Fed’s reticence to raise rates in the past has paid dividends, he cautioned that acting lethargically in the near term could lead to a disruptive, larger tightening at some point in the future.  The next FOMC meeting scheduled for December 13th is all but certain (according to market predictions) to conclude with a 25 basis point increase, but any hints as to the speed and number of future rate hikes in the Fed statement released, will be of chief concern to market watchers.     

Continued OPEC Deal Speculation Sends Oil Tumbling
Oil ministers from around the globe have until tomorrow to strike an agreement before the crucial OPEC meeting will adjourn.  The latest news from Vienna includes Iran’s continued stance that the nation will not make any production cuts so soon after the lifting of its oil sanctions.  Iranian Oil Minister Bijan Namdar Zanganeh outlined a plan for his country to freeze production at roughly 200,000 barrels per day more than their current output level of 3.775 million barrels, but remained resolute in resisting any overall output cuts.  Iraq has similarly remained unwavering in public comment from their original stance, stating that they should have partial exemption from any cuts given their need to finance an ongoing war with Islamic militants.  In response, Saudi Arabia, OPEC’s top producer, has affirmed its intention to reject a deal unless all members, with the exception Libya and Nigeria, participate in the arrangement, especially OPEC’s #2 and #3 producers (Iran and Iraq).  The constant tug-of-war has investors skeptical that these oil-producing nations will come to an agreement by tomorrow.  Prices of crude oil are down more than 3.75% on the day, with WTI crude trading at $45.30/barrel and Brent crude near $46.45/barrel.