Trade The Journey

Trade The Journey

A War begins!

Top of the Afternoon! I hope everyone is enjoying their weekend as the world saw a new war begin yesterday morning. Hamas broke through several borders, one being the fence separating Israel and the Gaza strip on the shield of thousands of rockets launched into Israel. They invaded by land, sea and air, catching Israel off guard.

Intelligence agencies had no knowledge that a coordinated attack would occur. Hamas entered Israel and began to fire upon citizens and took civilians as hostages back into Gaza. The hostages were paraded amongst large crowds of people that celebrated the invasion. Israel responded by launching air strikes as the Prime Minister of Israel, Benjamin Netanyahu, declared war.

Most think that Iran was behind the attacks as the offensive launched by Hamas was much different than their usual strategy, was well coordinated, and well funded. The death toll continues to rise as the war enters its second day as 700 Israelis and around 400 Palestinians have died. Being that the tension between Israelis and Palestinians is deeply rooted, there’s no telling what the chain events set in motion this weekend will lead to, especially if this becomes a regional war.

There’s also a war brewing in Africa along with the war still ongoing in Ukraine. There’s no doubt that these are volatile times and there’s no telling what the tension between the US and China might lead to as the world views the U.S. strength waning.

In other news, which seems like ages ago, treasury yields marched higher as the market sees higher rates for longer not just as a slogan but a way of life for the foreseeable future. This is one of the reasons why a Recession might be more likely than not. Yields rose not just in the US but in Europe as well. If we use the 2yr rates, which is common practice for 2/10 spread, yields are inverted for the 2/5 and 2/10 .

While I typically stay away from politics, the removal of the speaker of the house is concerning. The bill to fund the government was only up to Nov. 17, and now with the speaker of the house position vacant, this could lead to problems. Depending on the speaker elected and their allegiance, the probability of a government shutdown rises.

The Autounion workers strike continues.

Economics

Consumer Credit

Total consumer credit declined 3.8% year-over-year, revolving credit rose by 13.9 y/y, and nonrevolving credit declined by 9.8%. Total outstanding credit declined, rising for revolving credit but declining for nonrevolving credit. Rates continue to rise for consumer, credit, and personal loans.

Twenty-four-month person loans rose by 69 basis points to 12.17%. Sixty-month new car loans rose seven basis points to 7.88%, and thirty-two basis points to 8.12% for seventy-two-month loans. Credit card rates for loans rose fifty-one basis points to 21.19%.

MBA Weekly Index

Mortgage application volume declined by 6%. The refinance index declined by 7% and the purchase index declined by 6%. The average rate for a 30-year fixed conforming loan rose twelve basis points to 7.53%. The average rate for a 30-year fixed jumbo loan rose seventeen basis points to 7.51%. Rates continue to rise as treasury yields rise to multi-year highs. Application volume, refinancing and purchasing levels have declined to multi-year lows. It’s a tough time for the housing market.

Trade Balance

The deficit declined by 9%, as exports rose by 1.6% and imports declined by 0.7%. Exports increased across the board, only declining for automotive vehicles, parts, and engines. Imports declined for consumers goods, capital goods, and services. Imports rose for industrial supplies & materials. Imports of services rose for travel and other business services while declining for transport. Trade with China declined for exports and imports.

Manufacturing

ISM Manufacturing Index: September

Manufactured remained in contractionary territory at 49, however, it rose 1.4% from the previous month. This marks the eleventh month of contraction, following a two-year span of growth. New Orders rose 2.4% to 49.2%. Only food, beverage and tobacco products reported an increase in new orders for the six largest manufacturing sectors. The six largest manufacturing sectors are:

  • Transportation Equipment
  • Food, beverage, and tobacco products
  • Machinery
  • Computer & electronic products
  • Petroleum & Coal products
  • Chemical products

Although new orders are still below the 50 level there is some growth. The production index continues to expand, rising 2.5 points to 52.5. Production crossed into expansion territory in August. The prices index declined by 4.6 points to 43.8. The prices index shows the change in raw materials and manufacturers’ input prices. After reaching 48.4, in August, the September price index returned to levels seen in June-July.

The spike in prices was mostly likely due to rising crude prices. The backlog of orders index fell 1.7 points to 42.4 points. The backlogs index indicates that manufacturers have all but caught up to orders that were due or that new orders are declining, which they have recently. New export orders rose 0.9 points to 47.4, as the index rose slightly but remained below the 50 level. Imports rose 0.2 points to 48.2 and the report indicated there might be price pressures developing in container costs.

Employment rose 2.7 points to 51.2.  The only sector of the big six that didn’t register growth is the computer & related products sector. This is the first time in the last several months that employment expanded above the 50.4 level. According to the report, hiring freezes were more noticeable and attrition contributed to the reduction in the headcount.

Supplier deliveries remain below the 50 level as deliveries times are improving. Inventories rose 1.8 points to 45.8 as manufacturers’ building raw materials, work-in-progress and finished goods inventory slowed but is above the 44-level indicating expansion. Customers’ Inventories declined by 1.6 points to 47.1. Customers maintained their inventory levels in both July and August at the same level. There is a potential for customers to rebuild inventory levels in the future.

ISM Non-Manufacturing Index: September

The services sector fell by 0.9 points to 53.6, as services continued to grow showing only one month of contraction in the last two and half years. There was a slight decrease but not enough to push the Index into contraction. Business activity rose by 1.5 points to 58.8 with nearly all the sectors seeing a higher level of business activity except for construction, accommodation & food services and agriculture, forestry, fishing & hunting.

New orders declined by 5.7 points to 51.8, as new order growth slowed from last month’s level of 57.5. Employment activity drifted down by 1.3 points to 53.4 as the labor market remains competitive. Employment activity, while still expanding, seems to be a little volatile from month to month but still is above the 50 level.

Supplier delivery rose 1.9 points to 50.4 as deliveries slowed attempting to demand. Deliveries have slowed in the last several months. Inventories declined by 3.5 points to 54.2. The prices index was unchanged at 58.9, as prices remain high and have steadily increased for services. The backlog of order index rose 6.8 points to 48.6. The export index rose 1.6 points to 63.7 and the import index declined by 1.7 points to 50.6.

Inventory sentiment declined by 6.7 points to 54.8, as respondents indicated that inventory levels are still too high. Sentiment declined from August’s high of 61.5 within the last few months.

Factory Orders Report: August

New orders for manufactured goods rose 1.2%, after declining 2.1% in July. New orders for durable goods rose 0.1% and rose 2.1% for nondurable goods. Shipments rose 1.3% with shipments for durable goods rising 0.5% and nondurable goods rising 2.1%. Petroleum and coal products rose by 8.8%. Unfilled orders rose 0.4%. Unfilled orders for durable goods rose 0.4% and increased by 0.6% for nondurable goods.

Inventories for durable goods rose by 0.2% and for nondurable goods rose by 0.2%. Nondefense capital goods new orders declined by 2.9%.  Unfilled orders for capital goods rose 0.4%. Total inventories for capital goods rose 0.3%.

The Labor Market

Initial Claims

Initial claims rose by 2,000 but came in far below forecasts of 225,000 claims. Continuing claims fell by 1,000 to 1.664 million. The four-week moving average is now at 209,000, its lowest level in the last several months and defying the Fed’s hope of a slowdown in the labor market.

Employment Situation Report

The market forecast job growth totaling 170,000 jobs. Well, add 166,000 jobs to that total. Job gains were found in leisure & hospitality, government, health care, professional, scientific & technical services, and social assistance. The unemployment rate was unchanged, as was the number of unemployed people.

The labor force participation rate was unchanged at 62.8. Average hourly earnings rose 0.2%, rising 4.2% over the past year, as the rate of growth slowed this past month. The average workweek was unchanged at 34.1, as was the workweek for manufacturing. Overtime was unchanged for manufacturing. The reports for both July and August were revised upwards for a combined addition of 119,000 jobs.

JOLTS Report: August

While openings are down noticeably from last year’s levels, openings in August increased by 9.6 million. Openings increased in business services, finance & insurance, state & local government education, non-durable goods manufacturing, and the federal government. Openings are down sharply for manufacturing from last year’s levels. Hires, total separations, and quits were unchanged. The quits rate remained at 2.3%.

ADP Employment Report

The private sector only added 89,000 jobs, far below expectations. The goods-producing sector only added 8,000 jobs with manufacturing as the lone sector with a decline in jobs added. The service-providing sector added 81,000 jobs with trade/transportation/utilities and professional/business services sectors seeing job growth decline.

While the small and medium-sized establishments added jobs, the large establishments saw a decline of 83,000 jobs. Pay gains slowed for both job-stayers and job changers, growing 5.9% and 9% respectively.

Housing

Construction Spending Report: August

Total construction spending rose by 0.5% and increased by 7.4% year-over-year. Total private construction spending rose by 0.5%, and residential private construction spending increased by 0.6%. New single family construction spending rose by 1.73%.  New multiple family construction spending rose by 0.60%. Nonresidential private construction spending rose by 0.3%. Total public construction spending rose by 0.6%. Education constructions spending rose by 0.2% and rose by 0.4% for highway construction spending.

Technical Story

This week’s cash flow in review:

This past week went well although I made a few unnecessary purchases. So far, I’ve been able to build my savings with very few withdrawals. This is a good sign, meaning that my spending is in control. Last month I spent a little bit more than I intended.

Grade: C+

Reason: Bringing my expenses back within in balance

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