Stocks were up for the third week in a row. The main excitement for last week was the CPI numbers that came out on Tuesday, which we spoke about in our last Private Wealth Perspectives. In addition to the consumer inflation report, the October PPI and retail sales reports bolstered market expectations that inflation will continue to decelerate ahead without the need for additional rate hikes from the Fed. For the week, the Dow Jones Industrial Average was up 3.24%. The S&P 500 followed suit up 3.79%, and the NASDAQ gained 4.45% for the week. Meanwhile, the Russell 2000 small-cap index gained 5.20%.

Wednesday, the PPI (Producer Price Index) came out with October headline PPI dropping 0.5% month over month compared to the expected 0.1% gain. Year over year, the PPI was up 1.3% compared to the expected 2.0%. Core PPI (excluding Food and Energy) for October came in flat at 0.0% versus the expect 0.2%, with year over year reporting 2.4% versus the 2.6% expectation. While energy was a leading drag on PPI, vehicle wholesaling, apparel, and hotels also contributed to the lower-than-expected number.

Retail sales for the month of October declined 0.1% holding up better than the expected drop of 0.3%. The October contraction follows several months of upside surprises including an upward adjustment in September from 0.7% to 0.9%. This one-month reduction does not necessarily signal a longer term slowing of consumer spending, but it’s a start. Earnings reports from large retailers like Walmart last week reinforced the message that consumer spending is cooling.

The outlook for consumer spending next year largely hinges on developments in the labor market which remains resilient but is gradually loosening. Initial jobless claims for the week ending November 11 came in at 231K, which was higher than both the consensus expectation of 220K and the previous week of 218K. Continuing claims were above the expected 1,853M, coming in at 1,865M for the week ending November 4th, which was the highest level since November 26, 2021.

Despite average 30-year fixed mortgage rates pushing up to almost 8% in October, housing activity was more resilient than expected last month. October housing starts came in at 1,372M up 1.9%. Building permits were up 1.1%. However, Housing completions were down 4.6% month over month. While October starts and permits increased, they are constrained by high interest rates and affordability.

A stop gap funding bill was passed to avert a government shut down giving investor sentiment a boost. It funds part of the government – including public health, military construction, housing, transportation, agriculture and energy programs – until Jan. 19, with the rest funded through Feb. 2.

This week we celebrate Thanksgiving. We hope all of you take time to look beyond all the noise and focus on all the positives in our lives be they big or small. We give thanks for family, friends, co-workers, and clients. Whether your joy is food, shopping, spending time with others, or just quiet times at home, everyone here at First Merchants Private Wealth Advisors wishes you the best. We are thankful for you allowing us to help you prosper.