1. Home Sales Fell to a New 13-Year Low in October — Home-buying affordability sits near its lowest level in decades, pushing many buyers out of the market. Existing-home sales for the full year in 2023 are on track to be the lowest since at least 2011, according to economist forecasts.
Existing-home sales, which make up most of the housing market, decreased 4.1% in October from the prior month to a seasonally adjusted annual rate of 3.79 million, the lowest rate since August 2010, the National Association of Realtors said Tuesday. October sales fell 14.6% from a year earlier. Sales have been near 2010 levels in recent months.

Here is the market recap for the week
Sector Performance

Most sectors of the market were higher last week, with technology and communication services stocks leading the gains. The technology sector rose 2.1%, while the communication services sector advanced 1.9%. Other sectors that performed well included financials (up 1.3%) and consumer discretionary (up 1.2%).

Notable Developments

— In addition to the factors mentioned above, there were a few other notable developments in the market last week:
— Fed’s monetary policy outlook: Comments from Federal Reserve officials last week suggested that the Fed may be nearing the end of its rate-hiking cycle. This news was seen as positive for the market.
— Geopolitical tensions: Geopolitical tensions remained elevated last week, but they did not appear to have a significant impact on the market.

The week ahead — Economic data from Econoday.com:

I know where I’m getting out before I get in. — Bruce Kovner

1. US Inflation Broadly Slows, Erasing Bets on More Fed Rate Hikes — The so-called core consumer price index, which excludes food and energy costs, increased 0.2% from September, according to government figures. Economists favor the core gauge as a better indicator of underlying inflation than the overall CPI. That measure was little changed, restrained by cheaper gasoline. The Bureau of Labor Statistics figures reflected increases in rent and personal-care products and services, as well as health insurance due to a methodological change in how the government calculates it. Meanwhile, airfares and used-car prices declined.
Shelter prices, which make up about a third of the overall CPI index, climbed 0.3%, half the prior month’s pace. Economists see a sustained moderation in this category as key to bring core inflation down to the Fed’s target. A key measure of rent as well as hotel stays stepped down.
Excluding housing and energy, services prices climbed 0.2% from September and 3.7% from a year ago — the lowest in nearly two years — according to Bloomberg calculations. While Powell and his colleagues have stressed the importance of looking at such a metric when assessing the nation’s inflation trajectory, they compute it based on a separate index.
2. US Producer Prices Decline by Most Since April 2020 on Gasoline — The producer price index for final demand decreased 0.5% from a month earlier, a sharp slowdown that’s largely reflective of a decline in gasoline prices. Excluding food and energy, the so-called core PPI was unchanged, government data showed.
From a year ago, the overall measure was up 1.3%, while the core gauge posted the smallest annual increase since the start of 2021. Over 80% of the decrease in goods prices was due to a 15.3% slump in the cost of gasoline, the government report. Services costs, meanwhile, were flat after rising six straight months.

The week ahead — Economic data from Econoday.com:

“Do not SELL lower low, Do not BUY lower high”

1. China’s Exports Tumble Again in Fresh Sign of Economic Trouble — China’s exports fell for the sixth straight month, adding to pressure on Beijing to boost spending at home as a big rise in global interest rates and wars in Ukraine and the Middle East weigh on the world economy. Chinese exports fell 6.4% in October compared with a year earlier, to $275 billion, China’s General Administration of Customs said Tuesday, a steeper decline than the 6.2% fall recorded in September. Diminishing exports show global demand for Chinese goods is subdued as consumers and businesses contend with slowing growth and higher borrowing costs. Other Asian export powerhouses, such as South Korea and Taiwan, have also reported months of feeble overseas sales.
2. Citrix Owner Becomes Latest U.S. Company to Retreat From China — Cloud Software Group, which owns enterprise-software brand Citrix, is ceasing business transactions in China, becoming the latest U.S. company to pull back from China. Cloud Software Group is the latest U.S. technology company to withdraw or significantly shrink its business operations in China as the economy slows and national-security and data-related concerns grow.
This year, Microsoft’s LinkedIn closed down its China-focused jobs app, following its exit from its social-media business in the country. Salesforce shifted to a model in which it relies on a local partner to operate some of its products and services in China. It also laid off staff in mainland China and Hong Kong and closed its Hong Kong office, The Wall Street Journal reported.
3. Jerome Powell Outlines Cautious Approach to Raising Rates or Declaring End to Hikes — Fed Chair Jerome Powell said it was premature for the central bank to declare a conclusive end to its historic interest-rate increases of the past two years even though he didn’t make an argument for raising rates further right now. The Fed has raised interest rates this year to a 22-year high to combat inflation by slowing economic activity. Officials are committed to achieving a rate setting that is “sufficiently restrictive” to bring inflation down to its 2% goal over time. “We are not confident that we have achieved such a stance,” Powell said in remarks prepared for delivery at a conference in Washington on Thursday. Powell said officials would monitor economic conditions closely to avoid the risk of having raised rates too high and the risk of having been “misled by a few good months of data.”
4. US Credit-Rating Outlook Changed to Negative by Moody’s — the rating assessor lowered the outlook to negative from stable while affirming the nation’s rating at Aaa, the highest investment-grade notch. Amid higher interest rates, without measures to reduce spending or boost revenue, fiscal deficits will likely “remain very large, significantly weakening debt affordability,” Moody’s said. Moody’s is the only of the three main credit companies with a top rating on the US after Fitch Ratings downgraded the US government in August following the latest debt-ceiling battle. S&P Global Ratings stripped the US of its top score in 2011 amid that year’s debt-limit crisis.

The week ahead — Economic data from Econoday.com:

1. Fed Extends Pause on Interest-Rate Hikes but Keeps Door Open to Higher Rates — The Federal Reserve left interest rates unchanged at a 22-year high and signaled rates would remain elevated well into next year to keep inflation moving down. At the September meeting, most central-bank officials projected one more rate increase this year, but some have spoken in recent weeks as though they aren’t eager to hike again unless hotter-than-expected economic data force them to. That is a change from earlier this year, when they were more concerned about tightening too little. Officials have been trying to balance two risks. They don’t want to overdo rate rises to avoid causing an unnecessarily severe downturn. They also don’t want to allow inflation to reaccelerate or to settle at levels well above their 2% target. “We’re getting to a place where the risks are closer to being in balance,” Powell said.
2. US Productivity Grows by Most Since 2020, Labor Costs Decrease — US labor productivity advanced by the most in three years, helping to alleviate the inflationary impact of recent wage growth. Productivity, or nonfarm business employee output per hour, rose at a 4.7% annualized rate in the third quarter after climbing 3.6% in the prior period, data from the Bureau of Labor Statistics showed late last week.
Unit labor costs, or what a business pays employees to produce one unit of output, decreased at a 0.8% rate after climbing 3.2% in the second quarter. It marked the first decline since late 2022. Quarterly productivity figures are quite volatile, but overall, the back-to-back advances suggest companies are stepping up efforts to improve efficiency. Despite high borrowing costs, business investment has held firm, supporting long-term economic growth.
3. Sharp U.S. Hiring Slowdown Signals Cooling Economy Ahead — Employers added 150,000 jobs in October, half the prior month’s gain and the smallest monthly increase since June, the Labor Department said Friday. The unemployment rate rose to 3.9%, up a half-point since April, and wage growth slowed. The figures are likely to bring the Federal Reserve’s historic interest-rate increases to an end by providing stronger evidence that higher borrowing costs have slowed the economy. The report could also mollify concerns that brisk consumer spending this summer would lead hiring or wages to reaccelerate.
4. Tech Giants Spend Billions on AI Startups—And Get Just as Much Back — Amazon, Google and Microsoft have spent the past year investing billions of dollars in artificial-intelligence startups—while also charging those fledgling companies a similar amount to use their cloud platforms. The deals are making the big tech firms the largest backers and most direct beneficiaries of these startups, reflecting how some of the AI boom’s biggest rewards keep going to the most powerful players. The value of the tech giants’ stakes could shoot up if the startups take off. And if not, they still will have turned chunks of cash into revenue.

The week ahead — Economic data from Econoday.com:

There will not be any re-cap for the week of Oct 23rd through Oct 27th, 2023. We are away for some needed R&R.

The staffs at EGS.

The week ahead — Economic data from Econoday.com: