U.S. Markets: The major U.S. benchmarks ended the week mixed as investors reacted to stimulus negotiations and third-quarter corporate earnings reports.  The technology-heavy NASDAQ Composite performed the worst, dragged lower by weakness in bellwether Apple, while the mid cap S&P 400 and small cap Russell 2000 paced the field with modest gains.  The Dow Jones Industrial Average finished the week down 271 points to 28,336—a decline of -0.9%.  The NASDAQ Composite, the worst of the lot, finished down -1.1%.  By market cap, the S&P 500 gave up -0.5%, while the S&P 400 and Russell 2000 rose 0.9% and 0.4%, respectively.

International Markets: Canada’s TSX fell for a second week, down -0.8%, as was the United Kingdom’s FTSE 100, down -1%.  On Europe’s mainland, France’s CAC 40 declined -0.5% and Germany’s DAX fell -2%.  In Asia, China’s Shanghai Composite gave up -1.7%, while Japan’s Nikkei rose 0.5%.  Despite these headline losses, international markets as a whole gained: as grouped by Morgan Stanley Capital International, developed markets gained 0.4% and emerging markets added 1.7%.

Commodities: Precious metals finished the week mixed, with Gold declining -$1.20 to $1905.20 per ounce and silver rising 1.1% to $24.67.  Oil declined -3.1% after two weeks of gains finishing the week at $39.85 per barrel of West Texas Intermediate crude.  The industrial metal copper, viewed by some analysts as a barometer of world economic health due to its wide variety of uses, finished the week up 2%.

U.S. Economic News: The number of Americans filing first-time unemployment benefits fell to a new pandemic low, a welcome sign for the economy.  The Labor Department reported initial jobless claims fell by 55,000 to 787,000, marking the first time they’ve dropped below the 800,000-level since the coronavirus pandemic hit in March.  Economists had forecast new claims would fall to 860,000.  Continuing claims, which counts the number of Americans already receiving benefits, fell by 1.02 million to a seasonally-adjusted 8.37 million.  That reading is also a new pandemic low.  Despite the good news, analysts were quick to note that the number of claims remained more than three times higher than before the coronavirus outbreak.  Raymond James Chief Economist Scott Brown stated, “The downtrend in claims is good news, but the level is still extremely high by historical standards.”

Sales of existing homes increased for the fourth consecutive month in September, as the U.S. housing market continues to benefit from low interest rates.  The National Association of Realtors (NAR) reported total existing-home sales rose 9.4% from August to a seasonally-adjusted 6.54 million annual rate.  Home sales were up a whopping 21% compared with the same time last year.  As a result, the total inventory of homes for sale dropped to just a 2.7 months’ supply.  A 6-month supply of homes is generally considered to be a “balanced” housing market.  Lawrence Yun, the NAR’s chief economist wrote in the release that record-low interest rates and an abundance of buyers in the marketplace continued to lift the housing market well into its “non-peak” season.  “Home sales traditionally taper off toward the end of the year, but in September they surged beyond what we normally see during this season,” Yun wrote.

Confidence among the nation’s home builders reached a record high for the third consecutive month as buyers continue to flood into the market.  The National Association of Home Builders reported its monthly confidence index rose two points to 85 this month.  This was the third month in a row in which the index hit a record high, and only the second time that the confidence measure was at or above 80.  In the details of the report, the index that measures current sales conditions increased two points to 90, while the index of expectations for future sales over the next six points rose three points to 88.  By region, the Northeast and West both increased seven points to readings of 88 and 95, respectively.  In the Midwest, the index dropped one point to 77, and it fell two points in the South to 83.

The Census Bureau reported construction of new homes rose modestly in September, driven by high demand in the Northeast.  Home builders started construction on new homes at a seasonally-adjusted annual rate of 1.42 million last month—a 1.9% increase from the previous month’s downwardly-revised figure.  Compared with the same time last year, housing starts were up 11%.  The number of home building permits, used by analysts to get a read on future housing activity, occurred at a seasonally-adjusted annual rate of 1.55 million—up more than 5% from August and 8% from a year ago suggesting that new-home construction should continue at a steady clip.  Economists had expected starts to occur at just a 1.45 million pace and permits to come in at 1.52 million.

Research firm IHS Markit reported business activity increased to a 20-month high in October; however the pace of new business growth and new orders eased slightly.  Markit’s flash U.S. Composite Purchasing Managers Index (PMI) Output Index, which tracks both the manufacturing and services sectors, rose to 55.5 this month.  That reading is the highest since February 2019 and up 1.2 points from September.  Despite the reported pick-up in business activity, economists are predicting slower economic growth in the fourth quarter as the effects of the $3 trillion coronavirus stimulus package wane.  In the details, Markit reported its services sector index climbed to 56.0 from 54.6, while the index for the smaller manufacturing sector ticked up 0.1 point to 53.3.

The Federal Reserve’s Beige Book—a collection of anecdotes from each of the Fed’s member banks, reported improvements in economic activity in most parts of the country were “slight to modest”.  Furthermore, “changes in activity varied greatly by sector,” the central bank said.  Restaurants were worried about the looming cooler weather slowing sales (many of which have been able to stay afloat by offering outdoor dining), while banks voiced concerns about the prospect of rising delinquency rates.  The U.S. economy’s rebound has shown some signs of slowing in recent weeks as fiscal stimulus passed in early spring has expired and it appears the nation may experience a resurgence in COVID-19 cases.  The most recent economic data has been mixed, with consumer spending rising while jobs gains have slowed.

International Economic News: A poll of nearly 50 economists in Canada showed the nation’s economic recovery from the coronavirus recession will be significantly weaker than previously thought, in their view.  The emergence of a second round of infections in major Canadian cities has increased the chances of a severe health and economic crisis, says the report.  The Oct. 15-21 poll predicted the economy expanded a record annualized 44.5% in Q3, faster than the 30.0% predicted in July.  However, growth was expected to slow to 5.0% and 5.2% in Q4 2020 and Q1 2021, respectively.  Those forecasts for the current quarter and early next year were significantly lower than the 10.0% and 7.0% predicted just three months ago by the same group.

Across the Atlantic, the Bank of England is expected to step up spending to offer more support to the UK economy still struggling under the weight of the pandemic and fears of a no-deal Brexit.  The economy is expected to expand 2.6% this quarter and 1.0% next - weaker than the respective 3.4% and 1.3% median forecasts given last month.  James Smith at ING stated “The resurgence of COVID-19 across the UK and the resulting restrictions mean the recovery is set to stall.  It now looks fairly inevitable that the Monetary Policy Committee will top-up its asset purchase program.”  Having added 300 billion pounds to the program earlier this year, taking its total projected spend on gilts to 725 billion pounds, the median forecast is for a 100-billion pound increase on Nov. 5.  “That would give policymakers scope to continue making purchases until early summer next year if the pace of purchases stays broadly similar,” ING’s Smith said.

On Europe’s mainland, French Economy Minister Bruno Le Maire warned France’s economy could shrink in the final 3 months of the year as result of the widespread curfews imposed by the government to rein in a second wave of the coronavirus.  "In the 4th quarter, we risk seeing a negative growth rate," Le Maire told Europe 1 radio.  "But in the same way, I can say that the French economy will see a strong rebound in 2021" and that growth will return to 2019 levels in 2022, the minister said.  Earlier, Prime Minister Jean Castex had said that curfews initially planned for 9 major cities including Paris would be extended to cover as many as 54 different regions across the country, affecting 46 million people in all.

The sentiment of Germany’s consumers is expected to fall next month market-research group GfK stated.  GfK's forward-looking consumer-sentiment index is set to fall to -3.1 points in November from a revised -1.7 points in October.  Economists have forecast a -3.0 points reading for November.  Around three-quarters of consumers currently assume that Covid-19 poses a major or very major threat, and about half are concerned or very concerned about their personal future, GfK said.  The significant recovery seen in consumer sentiment at the start of the summer has come to a standstill and is causing the consumer climate to plummet once more, Rolf Buerkl, consumer expert at GfK, said.

In Asia, China posted 4.9% economic growth in its third quarter compared to the same period last year, keeping it on track to be the only major global economy to record an economic expansion this year.  Economists estimate China's yearly GDP growth could be north of 2.5% this year—even as the rest of the world economy is expected to shrink by at least 4%.  That differential will give Chinese companies more global market share and greater economic influence.  Michael Hirson, China and Northeast Asia practice head at the consultancy Eurasia Group stated, “What you're seeing now is basically China's stability premium kicking back in, in the sense that companies now are dealing with a global pandemic, and many of the places that they would move production to aren't looking so rosy right now.”  

Japan’s government upgraded its view on consumer demand in its latest monthly report, but cautioned broader economic conditions remained severe due to the coronavirus pandemic.  Authorities maintained their assessment that the world’s third-largest economy was showing signs of picking up from the fallout of COVID-19, which included a hit to Japan’s exports from a slump in global demand.  “While capital spending, exports, production and employment are improving, it of course can’t be said (economic conditions) have completely recovered so the overall assessment was left unchanged,” Economy Minister Yasutoshi Nishimura said.

(Sources:  All index- and returns-data from Yahoo Finance; news from Reuters, Barron’s, Wall St. Journal, Bloomberg.com, ft.com, guggenheimpartners.com, zerohedge.com, ritholtz.com, markit.com, financialpost.com, Eurostat, Statistics Canada, Yahoo! Finance, stocksandnews.com, marketwatch.com, wantchinatimes.com, BBC, 361capital.com, pensionpartners.com, cnbc.com, CNBC, FactSet.)