See this week's numbersFriday, December 9, 2016

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All the noise came from stocks

This week did not provide any significant market-moving data, just several reports that help fill in the economic puzzle. The real story this week was yet another series of record-breaking closes in the stock market. The three key stock indices reached new highs many times this week, with the Dow breaking records each day. The rally is a continuation of the activity seen since election day – investors are showing their optimism for lower taxes, greater job creation and less regulation by buying stocks. Financial, industrial and raw material stocks are just some of the sectors benefitting from the Trump rally. But, since this report is supposed to be about economic data, enough with the stock market and on to some of the reports from this week.

Other Key Indicators this Week:

JOLTS (Job Openings and Labor Turnover Survey) – The number of jobs waiting to be filled declined by 97,000 to 5.53 million in October. Even with the decline, the high level of job openings reflects a tight labor market. The quits rate remained at 2.1 percent, near the high mark reached during this economic expansion. The high rate reflects the confidence workers have about the ability to leave a job and find another. There were 1.4 unemployed people for every job opening in October, versus 1.9 people at the beginning of the recession in 2007.

Manufacturing – The manufacturing sector continues to show signs of improvement, despite its choppy advances. Factory orders rose for the fourth month in a row in October. The 2.7 percent increase was the strongest gain since January 2015. The 12-month annual rate of change is back in positive territory after negative rates for almost two years. New orders, minus transportation, rose 0.8 percent, and shipments of manufactured goods increased 0.4 percent. The preliminary durable goods report received earlier this month was revised lower by 0.2 percent to 4.6 percent. The proxy for business investments increased 0.2 percent after declining 1.5 percent in September. Productivity turned positive in the third quarter, increasing 3.1 percent. This was the first time in three quarters that productivity was positive. Output, hours worked and compensation were among the factors that improved.

Non-manufacturing –
The service industry, which makes up 90 percent of the economy, expanded in November at the fastest pace since October 2015. The ISM non-manufacturing index rose to 57.2 from 54.8. The index’s measure of business activity jumped to the highest level in a year, and the employment measure was at a 13-month high.

Between the Numbers:

The increase in Treasury yields has brought about a similar increase in mortgage rates, but not so with auto loan rates. The 15- and 30-year mortgage loan rates are up roughly 35 basis points since early November and are just a couple basis points below last year’s rates. Auto loan rates, on the other hand, have barely moved in three years. The spread between lending and investment rates continues to narrow and will do so until consumers become comfortable with the rising rates. But with rising rates, comes an increase in default rates. It is prudent to be mindful of the risk/reward balance of your lending program during this period of rate readjustment.

Sarina Freedland – Senior Investment Officer

Although this information has been obtained from sources we believe to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. This is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. All herein listed securities are subject to availability and change in price. Past performance is not indicative of future results. Changes in any assumption may have a material effect on projected results.

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