10/25/19 – Earnings Mixed, but Stocks Higher

Market continued marching higher in a week with mixed earnings reports. Companies such as Visa and Microsoft reported better than expected earnings while names like 3M, Amazon and others missed. This lead to a divergence in performance for many blue chip names, but overall the indices moved higher and sit near all-time highs. Overall, 78% of reporting companies this quarter have beaten expectations. What’s been interesting to see in many of these reports is a slightly better than expected view on the future. October consumer confidence numbers came out higher than September as well. For the week, the Dow gained 0.7% while the S&P 500 increased 1.2%. Read More

The federal deficit doesn’t make the news much anymore, but it continues to balloon. The deficit is the difference in what the government spends and what it collects in tax revenue. That amount must be borrowed each year to fund the difference. In Fiscal 2019, which ended September 30, the deficit increased 26% over 2018 and reached a seven year high of $984 billion. Total government revenues increased 4% to $3.4 trillion, but spending increased 8% to $4.4 trillion. This increased deficit spending serves as a stimulus to the economy and props up economic growth numbers artificially. While deficit spending can help growth in the short term, it creates long term problems for an economy. We are fortunately still able to borrow money at very low rates, but that can’t continue forever. Sadly, no one in Washington DC seems interested in reducing spending to help the situation. Read More

Oil increased 5.5% this week to close at $56.64/barrel. The yield on the 10-yr Treasury moved higher, closing at 1.80%, from 1.75% last week. The average rate on a 30-yr fixed rate mortgage moved higher to 3.75% from 3.69% last week.     

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