October 27, 2023

US Economy Surges 4.9 Percent, Fueled by Consumer Spending

📰 News Organizations

  • US Economy Surges 4.9 Percent, Fueled by Consumer Spending. The better-than-expected GDP growth rate was fueled by real consumer spending, advancing 4% in the July-to-September period. The consumer contributed 2.69% to the final GDP number.

  • U.S. Trade Deficit in Goods Widens 1.3%. The U.S. trade deficit in goods widened to $85.8 billion in September. The deficit has been trending lower after hitting $125.3 billion in March 2022. The outlook for global trade is weakening and the trend is expected into 2024.

  • Mastercard Reports Higher Consumer Spending With Expenses Rising. Purchase volume on the firm’s cards surpassed analyst forecasts for the third quarter, rising 12% to $1.88 trillion for the three months ended Sept. 30.

  • Siemens Energy Shares Slide 35% After Company Seeks Support. German business news weekly WirtschaftsWoche reported Thursday that Siemens Energy was seeking up to 15 billion euros ($15.8 billion) in guarantees.

  • Uber Begins Offering Rides In Self-Driving Waymo Cars. Uber users in Phoenix, Arizona, will be able to ride in a fully autonomous car. This is the live rollout of the partnership announced in May between Uber and Waymo, the vehicle company owned by Alphabet.

  • Amazon’s Profit Triples as Sales Show Resilience Leading Into Holidays. Amazon’s profit tripled to nearly $10 billion from July to September as strong sales in its cloud-computing, advertising, and retail units helped the company continue its rebound.

🐦 Twitter

  • “The most important number out there is that 10-year yield, and that 10-year yield is unanchored right now:” State Street’s Loh. The institutional buyers are still buying, he said, but there’s “a lot of paper, and the knife is pretty big and falling still”. Source.

  • The “effective mortgage rate” at 3.6% is the average rate on existing mortgages. The “market mortgage rate” at 7.9% is the rate on new mortgages. The last time the divergence was this wide it took 8 years to converge from 1976-84. Source.

  • Delivery of new apartment supply is currently impacting rent growth. Expect this pressure to persist for another few quarters…volume of new apartment starts has begun to decline, and we expect that leasing conditions will be supportive of higher rent growth in late 2024. Source.

  • The nation's largest owner of single-family rentals, Invitation Homes, is once again a net buyer. It now owns 84,697 single-family homes—up from 82,837 homes last quarter. If you exclude that added +1,870 home portfolio, it would've still been a net buyer in Q3. Source.

  • Bank deposit volatility has subsided for large and small banks since disruptions earlier this year; and on week/week basis, deposits at large banks are up 0.14% while those at small banks are down 0.15%. Source.

Another potential pathway to improved affordability is if we enter a prolonged period during which increased home construction restrains house price growth, while incomes continue to rise. This, combined with lower rates, is how national affordability improved in the 1990s.

Lance Lambert

📓 Online Publications

  • Mortgage Demand Slips Again as Rates Continue Relentless Rise. Loan applications slip to lowest level since 1995 as mortgage rates climb for the 7th week in a row, according to a weekly survey of lenders by the Mortgage Bankers Association.

  • Pending Home Sales Increase 1.1% in September; Down 11% Year-over-year. Despite the slight gain, pending contracts remain at historically low levels due to the highest mortgage rates in 20 years. Furthermore, inventory remains tight, which hinders sales.

  • Amazon Spins Up New Cloud Division for Europe. Its AWS cloud division is launching a "European Sovereign Cloud." That means that AWS' Europe business is breaking away from the core business aimed at soothing increasingly irate European regulators.

  • Nvidia, AMD, and Qualcomm are Ganging Up On Intel. Qualcomm just unveiled its new Arm-based chips for Windows PCs. Meanwhile, Nvidia and AMD are on their way with Arm PC chips by 2025.

  • Polygon Deploys POL Token On Ethereum. POL will power Polygon's upcoming revamped staking layer. The layer will support restaking, allowing stakers to simultaneously perform multiple tasks for different Polygon networks.

  • Bitcoin to Score 'Golden Cross' After 30% Price Surge in 2 Weeks. Bitcoin is on track to complete its first golden cross since early February, a sign of strengthening bullish momentum in which the 50-day SMA overtakes the 200-day SMA on an upward trajectory.

🎧 Podcasts

  • UAW Contract with Ford. The car company and the negotiators of the United Auto Workers union have reached a tentative labor deal, the union said Wednesday, for a 4-1/2-year contract that would provide a record pay boost. Source(1:55)

  • Boeing Lost Billions on Air Force One. Boeing faced numerous problems with the VC-25B program, including shortages of workers and parts, that have delayed delivery of the first of two Air Force One jets until 2027. To date, the company has lost over $2.4 billion. Source(5:15)

  • Apple's Bold VR Move. Apple is strategically aiming for a high-end VR experience, prioritizing desirability over immediate cost concerns. By leveraging future technological advancements, they expect to outpace competitors and dominate the market. Source(9:01)

  • Why Single Family Homes. Jason Hartman says that single-family homes provides investors with stable cash flow, appreciation potential, tax advantages, and ease of management. It offers diversification, liquidity, and a lower entry point for investors. Source(9:04)

  • Bond Rates Signal Economic Concerns. Bonds at 5% strongly suggest an expectation of economic weakening, prompting speculation about potential Fed rate cuts. Despite a delayed timeline, the belief in an impending economic downturn persists. Source(19:20)

  • Mike Johnson Elected US House Speaker. Congressman Mike Johnson was a vocal supporter of Donald Trump’s efforts to overturn the 2020 presidential election. The hope is, now with Johnson in charge, the House can once again focus on legislation. Source(1:04)