Markets enjoyed another month of strong gains, boosted by encouraging economic data and hopes surrounding tax reforms. Additionally, the Fed chose not to hike rates in November and offered a positive view about the U.S. economy. Significant progress was made on President Trump’s much-vaunted tax legislation. Ultimately, the House of Representatives finally passed the much awaited tax cuts legislation now named as the Tax Cuts and Jobs Act.
November’s Performance
For the month of November, the Dow, the S&P 500 and the Nasdaq surged 3.87%, 2.8% and 2.2%, respectively. The blue-chip index posted its eighth consecutive month of gains — the highest streak of gains in the last 22 years. Meanwhile, the S&P 500 also posted eight straight months in gains. The last time around when the S&P 500 had achieved such a feat was way back in 2007. The indexes have gained in the range of 18% to 28% so far in 2017.
The Fed chose not to hike rates in November and offered a positive view about the U.S. economy and said that it has been improving at a “solid rate.” On Nov 16, the House finally passed the Tax Cuts and Jobs Act. Finally, The Federal Open Market Committee (FOMC) minutes indicated that a rate hike was almost certain in December, but stated that only one or two rate hikes are likely in 2018.
Encouraging Domestic Data
Economic data released during November was largely encouraging. ISM Services Index increased from 59.8% to 60.1% in October, reaching its best settlement since August 2005. Construction spending increased 0.3% to $1.22 trillion in September, up from 0.1% in August. Retail sales for October increased a meager 0.2%, but exceeded the consensus estimate.
Industrial production for October surged 0.9%, surpassing the consensus estimate of 0.6%. PPI for October came in at 0.4%, in line with the previous month’s figure. Core CPI for October came in at 0.2%, up from 0.1% in September. Factory Orders increased by 1.4%, exceeding the consensus estimate of 1.3%. Consumer spending surged 0.3% in October, in line with the consensus estimate for the period.
However, PCE Inflation for October came in at 0.1%, below the previous month’s figure of 0.4%. Additionally, the ISM Manufacturing Index came in at 58.7 in October, down from 59.8 in September. Also, durable orders declined 1.2% in October.
Housing Sector Picks Up
As the impact of hurricanes Irma and Mathew receded, homebuilding picked up in the United States. Building permits increased 5.9% to 1.3 million units in October. Moreover, housing starts jumped 13.7% to 1.3 million units last month — the highest level since October 2016. The consensus estimate for the period was 1.2 million units. Moreover, the index of home builder sentiment touched an eight-month high in November.
