MARKET UPDATE: DURABLE GOODS ORDER, US GDP, PERSONAL CONSUMPTION EXPENDITURES

What We Are Watching This Week

• ISM Manufacturing and Services 
• ADP Employment Report 
• US Employment Report 

Highlights From Last Week 

• Durable Goods Orders 
• US GDP 
• Personal Consumption Expenditures 

MStocks posted another week of gains, with the Dow Jones Industrial Average, S&P 500, and S&P 400 Mid-Cap Index reaching record intraday highs. The Russell 2000 Index also set a new intraday record of 2,466.49 on Monday, breaking its previous high from over three years ago. Trading activity remained robust leading to Thanksgiving despite markets closing on Thursday and having an abbreviated session on Friday. Investor sentiment during the week was influenced by domestic policy and geopolitical developments. Optimism grew following President-elect Donald Trump’s nomination of Scott Bessent as Treasury secretary. Bessent, a seasoned hedge fund manager, was perceived as a stabilizing choice, likely to prioritize economic stability and inflation control while adopting a cautious stance on tariffs, alleviating concerns about an unconventional appointment. 

Toronto’s equity markets closed the week on a high note, driven by gains in the technology and real estate sectors, pushing the TSX to a new all-time record. The TSX rose 104.48 points on Friday to close at 25,648, marking a weekly gain of 203 points or 0.8%. The Canadian dollar inched up 0.04 cents to 71.43 cents U.S. On the economic front, Statistics Canada reported a 0.1% increase in GDP for September, as growth in services-producing industries partially offset declines in goods-producing sectors. 

The pan-European STOXX Europe 600 Index rose 0.32% despite uncertainties surrounding U.S. trade tariffs and interest rates. Performance across major stock indexes was mixed: Germany’s DAX gained 1.57%, while Italy’s FTSE MIB fell 0.70%, and France’s CAC 40 declined 0.29%. The UK’s FTSE 100 saw a modest increase of 0.24%. Eurozone annual inflation accelerated to 2.3% in November, up from 2.0% in October, driven by energy price normalization. However, underlying inflation pressures eased, with services inflation ticking down to 3.9% and core inflation holding steady at 2.7%. Financial markets still anticipate a European Central Bank rate cut next month, though the extent is uncertain. In Germany, October retail sales fell sharply by 1.5%, far worse than the expected 0.5% drop, signaling continued economic struggles. However, the labor market remained resilient, with unemployment rising by only 7,000—far below the 20,000 forecast—and the jobless rate steady at 6.1%. 

The Conference Board Consumer Confidence Index rose to 111.7 in November, up from 109.6 in October, driven by improved consumer assessments of current business and labor market conditions. The Present Situation Index climbed to 140.9, while the Expectations Index edged up to 92.3, above the recession-signaling threshold of 80. Younger consumers under 35 showed significant confidence gains, while confidence dipped slightly for those aged 35-54. Confidence among high earners ($125K+) and low earners (<$15K) declined. Consumers were more optimistic about job availability, marking a three-year high, though future business conditions expectations were stable, and income prospects dipped slightly. Stock market optimism surged, with 56.4% expecting price increases. Inflation expectations fell to 4.9%, the lowest since March 2020, though higher prices remain a top concern for 2025. Buying plans shifted: home purchasing plans stalled, while auto plans rose slightly. Consumers needed more certainty about durable goods purchases and planned reduced spending on most services, except for travel and health care. Attention shifted toward the November elections, reflected in write-in responses. Overall, optimism about job growth and stock markets contrasted with concerns about inflation and prices, shaping consumer sentiment for the coming months.¹ 

In October 2024, sales of new single-family homes slowed to a seasonally adjusted annual rate of 610,000 units, as the U.S. Census Bureau and the Department of Housing and Urban Development reported. This represents a significant decline of 17.3% compared to the revised September figure of 738,000 and a 9.4% drop from October 2023’s estimated rate of 673,000. The median price of new homes sold in October was $437,300, while the average price reached $545,800, reflecting a robust market for higher-priced homes despite the overall slowdown in sales activity. At the end of the month, the inventory of new homes available for sale was estimated at 481,000 units. This supply equates to approximately 9.5 months of sales at the current pace, highlighting an accumulation of unsold homes as market conditions evolve.² 

At their November meeting, Federal Reserve officials expressed confidence that inflation was progressing toward the 2% target while remaining cautious about easing interest rates too quickly. Policymakers were less concerned about economic slowdown than in September. They highlighted the need to balance risks between prematurely easing policy and undermining progress on inflation versus acting too slowly and weakening economic activity. The Federal Open Market Committee (FOMC) unanimously approved a quarter-point rate cut, lowering the federal funds rate to 4.5%-4.75%, following September’s half-point cut. Despite weak October job data influenced by hurricanes and strikes, officials considered the labor market resilient. While inflation had eased from its peak, core inflation remained elevated, and some officials acknowledged it might take longer to reach the 2% goal. With ongoing uncertainty about the neutral interest rate, the Fed suggested a cautious, gradual approach to further rate adjustments. The next meeting is set for December 17-18.³ 

For the week ending November 23, initial claims for seasonally adjusted unemployment benefits fell to 213,000, a decrease of 2,000 from the prior week’s revised figure of 215,000. The 4-week moving average also dropped to 217,000, down by 1,250 from the previous week’s revised average of 218,250. In the week ending November 9, the total number of continued weeks claimed across all unemployment benefit programs rose to 1,687,984, an increase of 12,876 from the previous week. For comparison, 1,681,422 claims were filed during the same week in 2023.⁴ 

In October, new orders for manufactured durable goods rebounded after two months of declines, rising by $0.7 billion (0.2%) to $286.6 billion, according to the U.S. Census Bureau. Transportation equipment led this increase, climbing by $0.4 billion (0.5%) to $97.1 billion. Excluding transportation, new orders rose 0.1%, and excluding defense, they increased 0.4%. However, durable goods shipments declined for the third consecutive month, dropping by $1.6 billion (0.6%) to $285.2 billion. This decline was primarily driven by transportation equipment shipments, which fell by $1.9 billion (2.1%) to $92.0 billion. Unfilled orders rose for the 50th time in the last 51 months, increasing by $6.1 billion (0.4%) to $1,398.8 billion, with transportation equipment again leading, up $5.1 billion (0.6%) to $901.9 billion. Inventories of durable goods remained nearly unchanged, dipping slightly by $0.2 billion to $527.7 billion, driven by a $0.4 billion (0.2%) decrease in transportation equipment inventories.⁵ 

According to the Bureau of Economic Analysis, the U.S. economy grew at an annualized rate of 2.8% in the third quarter, consistent with initial estimates and signaling strong momentum heading into the holiday season. Consumer spending, which drives over two-thirds of economic activity, rose at a robust 3.5% pace, slightly revised down from the initial 3.7% estimate. Business fixed investment showed stronger-than-expected growth, revised upward to 1.1% from 0.3%. However, corporate profits declined by 0.3% in the third quarter, following a 3.6% increase in the prior quarter, reflecting mixed dynamics across the economy.⁶  

In October, the personal consumption expenditures (PCE) price index rose 0.2% month-on-month, matching September’s pace, while annual inflation accelerated to 2.3% from 2.1% in September, which aligns with forecasts. Core PCE, which excludes volatile food and energy costs, increased 0.3% month-on-month, consistent with September, and 2.8% year-on-year, up from 2.7%. These inflation metrics, closely monitored by the Federal Reserve, suggest price pressures remain slightly above the central bank’s 2% target. The data may influence the Fed’s upcoming December policy decision as officials consider whether to pause or continue rate cuts after lowering borrowing costs in September and October. Markets remain divided on the likelihood of another rate cut, with some analysts pointing to the elevated 0.3% monthly core inflation as a potential barrier to further easing. The Fed’s current target range for the federal funds rate is 4.50%-4.75%. In October, personal income rose by $147.4 billion, a 0.6% increase at a monthly rate. Disposable personal income (DPI), which accounts for income after taxes, grew by $144.1 billion, or 0.7%. Personal outlays, including consumer spending, interest payments, and transfer payments, increased by $69.8 billion (0.3%), while consumer spending alone rose by $72.3 billion (0.4%). Personal savings reached $962.7 billion, with the personal saving rate—savings as a percentage of disposable income—standing at 4.4% for the month.⁷ 

1. https://www.conference-board.org/topics/consumer-confidence/press/CCI-Nov-2024 
2. https://www.census.gov/construction/nrs/pdf/newressales.pdf?os=icxa75gdubbewzke8c&ref=app 
3. https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20241107.pdf 
4. https://www.dol.gov/ui/data.pdf 
5. https://www.census.gov/manufacturing/m3/adv/pdf/durgd.pdf 
6. https://www.bea.gov/news/2024/gross-domestic-product-third-quarter-2024-second-estimate-and-corporate-profits#:~:text=Real%20gross%20domestic%20product%20(GDP,U.S.%20Bureau%20of%20Economic%20Analysis. 
7. https://www.bea.gov/news/2024/personal-income-and-outlays-october-2024  

Important Information:

Warren Gerow is an independent investment wealth consultant to Sightline Wealth Management.

Sightline Wealth Management LP (“Sightline”) is an investment dealer and is a member of the Canadian Industry Regulation Organization (CIRO) and the Canadian Investor Protection Fund (CIPF).

Sightline provides management and investment advisory services to high-net-worth individuals and institutional investors. Sightline Wealth Management LP is a wholly owned subsidiary of Ninepoint Financial Group Inc. (“NFG Inc.”). NFG Inc. is also the parent company of Ninepoint Partners LP, it is an investment fund manager and advisor and exempt market dealer. By virtue of the same parent company, Sightline is affiliated with Ninepoint Partners LP. Information and/or materials contained herein is for information purposes only and does not constitute an offer to sell or solicitation to purchase securities of any issuer or any portfolio managed by Sightline Wealth Management or Ninepoint Partners, including Ninepoint managed funds.

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