One of the biggest news items of the past week was the Midterm elections. Voters elected 36 state governors, 36 Senators, and all 435 members of the House of Representatives. The Republicans took 7 seats that are currently held by Democrats in the Senate, and now have 53 seats in the Senate; with one seat from Louisiana still up for grabs. However, most bills need 60 votes to pass, so they will need bipartisan support to pass legislation. They also have increased their majority in the House to at least 245 seats. They also won the majority of the gubernatorial races. Even in states where Democrats were expected to win, the races came down to the wire. For example, in Virginia, the Senate race between Senator Mark Warner and Republican candidate Ed Gillespie was expected to be a sure win for the Democrats. The race is within half a percentage point and will likely go to a recount.
With this win, Senator Mitch McConnell is expected to be the Majority leader and Sen. Richard Shelby is likely to be the next chairman of the Senate Banking Committee. Shelby is a harsh critic of Fannie Mae and Freddie Mac. The current chairman, Sen. Tim Johnson, is retiring; which leaves four possible choices to be the lead Democrat on the committee. However, it is expected that Sen. Sherrod Brown will become the ranking member. He, along with Shelby, is a critic of the “too big to fail” institutions. It is also expected that the Dodd-Frank Act will come under scrutiny with the new leadership and it is likely that some provisions of the Act could be repealed.
In other news, Jobless Claims fell again. The 4-week moving average fell by 2,250 and is the second lowest since the Great Depression. U.S. Productivity increased 2 percent. Output of goods and services increased by a seasonally adjusted 4.4 percent. The ADP Jobs Report showed an increase of hiring over September. The private sector added 230,000 jobs. The U.S. Trade Deficit grew 7.6 percent – about $3 billion – in September. This reflects slower growth in the economies of U.S. trading partners. The Federal Reserve released the latest home equity holdings quarterly data. Construction spending fell .4 percent in September according to the U.S. Commerce Department. U.S. Auto Sales were slightly higher in October. U.S. manufacturers increased production to their highest level in ten years. The ISM Manufacturing Index rose to 59 percent from 56 percent last month. The ISM’s New-Orders Index also was up 5.8 percent from September.
Mortgage Credit Availability was down again in October. The Mortgage Credit Availability index fell 2.5 percent in October. The Mortgage Bankers Association said that this drop was due to a special loan program ending. This program was for REO sales and likely ended because of a smaller amount of REO properties for sale.
The U.S. added 214,000 jobs in October, slightly less than what was anticipated. Unemployment dropped to 5.8 percent. Despite unemployment being at a six year low, Americans wages are fairly static. Average Hourly Wages rose 3 cents in October. The average increase is approximately 2 percent.
In equities, the Dow Jones closed at a record high, 17,574. Friday marked the third day in a row it closed at a record high, and finished the week up 1 percent. Monster was a big mover and up 8 percent on Friday on better than expected profits. Sears Holding Corp jumped 31 percent on news that it was looking into forming a real estate investment trust to improve its balance sheet.
This week should be a slower week, especially with Veteran’s Day on Tuesday. Some of the reports coming out in the latter part of the week are: The NFIB Small Business Index, Weekly Jobless Claims, Retail Sales, and Consumer Sentiment.
We would like to thank all Veterans for their service and sacrifices!