Wentz Weekly Insights
Thanksgiving Weekend Retail Sales Mostly Stronger than Expected

We hope everyone had a Happy Thanksgiving with friends and families.
Even with the Thanksgiving weekend past, looking forward markets will see another slow several days. If it seemed like there was a lack of market moving events and headlines over the past two weeks, it’s because there was, unlike the past several months. The path of least resistance for stocks has been to the upside, and with a lack of events on the calendar for a few days along with it being the strongest period of the year for stocks, it is likely stocks will continue pushing higher in the short-term and just being just 1% away, could hit new year-to-date highs.
The next notable events to monitor is Thursday’s economic data on personal incomes, consumer spending, and more importantly the PCE price index. This is the Fed’s preferred measure of inflation so investors will likely put more emphasis on this data. Recall in October’s CPI report two weeks ago, inflation cooled slightly more than expected, triggering a strong rally in stocks and bonds (and lower bond yields). Economists are estimating the core price index (excludes food and energy prices) increased 0.2% but slowed to a 3.5% year-over-year rate.
After that, focus shifts to employment data next week (job openings, ADP employment, jobless claims, and the DOL employment report), and the last FOMC meeting of the year the week after. Investors will look for cues on rate cut probabilities for 2024.
Turning to the Black Friday shopping weekend, it is always interesting to see the trend in retail sales during this period, beside it being another important data point to assess the health of the US consumer. Estimates on sales growth were quite mixed, but overall sales were better than expected. Here are some Black Friday shopping statistics:
Adobe Analytics:
  • $5.6 billion spent online on Thanksgiving, a 5.5% y/y growth rate
  • Record online sales on Black Friday of $9.8 billion, an increase of 7.5% from last year.
  • Online sales saw a 8.1% y/y growth on Saturday
  • Online sales saw a 6.4% y/y growth on Sunday
  • Adobe said its data saw most growth in electronics like smartwatches, TVs, and audio equipment, along with Barbie dolls and KidKraft play sets.
  • Adobe also said consumers are relying more on buy now, pay later options – where orders placed with that option grew 47%.
Mastercard SpendingPulse:
  • Reported overall Black Friday spending was up 2.5% year-over-year. In store sales were up 1.1% while online sales were up 8.5%.
  • Jewelry and apparel were the top sales items while furnishings lagged.
  • Its report said key trends included higher e-commerce sales with a number of sporting events during the day contributing to this, stronger restaurant sales, and retailers began Black Friday deals earlier in the month which gave consumers more time to shop for promotions.
Salesforce said online Black Friday sales were $70.9 billion globally, up 8.0% year-over-year and 8.0% in the U.S. It added 79% of online sales came from mobile phones, a record high.
SensorMatic said in-store traffic was up 4.6% year-over-year.
RetailNext said in-store traffic was up 2.1% year-over-year.
Week in Review:
Stocks opened the holiday shortened week relatively unchanged. An auction of 20-year Treasury bonds was relatively well received from investors, more so than the recent 10- and 30-year auctions a couple weeks earlier. This may have been the catalyst that pushed yields slightly lower for the day. Although stocks opened unchanged, they moved higher through the day, finishing near the highs of the day on broad strength, with the NASDAQ finishing at a 22-month high. There was a big focus on Microsoft and OpenAI during the day after former OpenAI CEO (who was ousted the Friday prior) was reportedly joining Microsoft to lead new research efforts, which also led to concerns of a potential departure of talent from OpenAI.
Tuesday was a quiet day as well with stocks seeing little movement again, although small caps did struggle. Data on existing homes show the sales pace dropped to the lowest level since 2010 amid very low supply of existing homes and high mortgage rates. Meanwhile the minutes of the Fed’s most recent meeting were released and did not reveal additional details, and it is worth noting there was no mention or talk on potential rate cuts now or in the future, with officials leaving the option open for additional rate hikes if inflation progress slows. Several retailers reported earnings with results overall mixed and cautious for the holiday shopping period.
It was a another fairly quiet day the session before markets were closed for Thanksgiving. The biggest headline was Nvidia’s earnings report after Tuesday’s close where its results significantly beat expectations with very strong guidance, but the stock was lower over concerns about the exports restrictions to China and how that will affect future sales and earnings growth. In the commodity space, oil was down slightly after OPEC said it would delay its policy meeting scheduled for Friday. Stocks were up 0.41% while Treasuries were mixed.
Stocks were able to continue their move higher in a shortened trading day on Friday. Treasury saw yields higher across the curve while all but two equity sectors (telecom and tech) were higher on the day. Volume was less than half 2023’s daily average with the S&P 500 gaining 0.06% while the Dow rose 0.33%.
In what was a very quiet week, stocks rose across the board while Treasury yields increased only slightly. Despite speculation that OPEC would cut production further at its next meeting, crude oil saw its fifth consecutive weekly decline with a 0.5% drop. The dollar index fell another 0.5% for its lowest level since August, while gold rose 1.04%. Stocks finished as follows: Dow +1.27%, S&P 500 +1.00%, NASDAQ +0.89%, and Russell 2000 +0.54%.

Recent Economic Data

  • The number of existing homes sold in October fell for the fifth consecutive month for the slowest sales pace since the aftermath of the Financial Crisis 13 years ago. Sales fell 4.1% in October to a new seasonally adjusted annualized rate of 3.790 million, about 100k below consensus expectations. Sales fell in all regions except the Midwest, where sales were flat. Compared to a year ago, the sales rate was 14.6% lower in the month. Existing home sales represent closed sales, so this data reflects contracts signed in September when mortgage rates spiked. A persistent lack of inventory continues, combined with the highest mortgage rates in over two decades, has been a major factor for lower sales. The report noted starter and mid-priced homes are still seeing multiple offers, while upper end of the market are seeing price concessions. Inventory of 1.15 million homes was up roughly 2% in the month but remains down 6% from last year and at just 3.6 month supply at the current sales pace (around 6 months is considered a balanced market).
  • The number of unemployment claims filed to the states the week ended November 18 was 209,000, a decrease of 24k from the prior week, which was the highest since August. The four-week average stands at 220,000. The number of continuing claims was 1.840 million, down 22k from the prior week with the four-week average at 1.837 million, the highest four-week average since the end of 2021.
  • Order for manufactured durable goods for October decreased 5.4%, more than the 3.2% decline expected and coming after a strong 4.0% increase from September. As is usual, transportation drove much of the downside with new orders down 14.8% due to a 49.6% decline in aircraft orders (follows a 91% increase from September). Excluding the volatile component, durable goods orders excluding transportation were flat in the month as expected. The important number for GDP, shipment of nondefense capital goods excluding aircraft, were flat in the month for the second consecutive month.
  • Consumer sentiment, based on the University of Michigan consumer survey, improved from the first survey of the month, but remains at the weakest levels since June. The consumer sentiment index level was 68.3, up from the first November reading of 65.7 but down from 70.6 in October. The index on current conditions fell to 68.3 for the weakest since June while the expectations index was 56.8, down from 59.3 in October. Inflation expectations have risen in recent weeks, with the one-year ahead inflation expectation at 4.5%, up from 4.2% in October and the highest level since April. It was just two months ago the one year inflation expectation was 3.9%, so the recent readings are not a good sign for future inflation. The five-year ahead inflation expectation remained at 3.2%.

Company News

  • One of the bigger company specific headlines last week was the drama between OpenAI and the firing of its CEO, Sam Altman. OpenAI is the company behind the chatbot ChatGPT and who Microsoft has invested billions in to advance its AI capabilities. Before last weekend, the OpenAI board decided to oust its CEO over what they called a loss of confidence. It turned into a dramatic couple days, with most of the staff calling for the removal of board members, and ex-CEO Sam Altman saying he would come back but there would need to be a change in governance, but he ultimately ended up joining Microsoft to head new research efforts on advanced AI. Some reports say many employees were even planning a mass exodus unless there was change on the Board and venture capital investors were threatening to sue. It was then Wednesday when it was announced Altman would return to OpenAI as CEO with an overhaul of the Board.
  • Ford said it is restarting the construction of an EV battery plant which was paused during the UAW (United Auto Workers) strike. However, the size of the plant is going to be smaller than originally planned with the company citing slowing EV sales growth. The report, by the Associated Press, said as a result it will see 1,700 jobs instead of 2,500 and battery cell output per year will decline to 230,000 vehicles from 400,000 vehicles.
  • Broadcom received the final regulatory approval from Chinese regulators to finalize its acquisition of VMWare, under the conditions it will not be allowed to bundle its products with VMWare products in an unreasonable fashion in a way to gain an advantage over competitors. The $69 billion acquisition closed on Wednesday.

Other News

  • As of Friday, crude oil has fallen 23.5% drop from its September highs due to rising inventories and worries over weakening global demand. Two weeks ago, reports began to surface that OPEC was considering whether to make additional supply cuts at its next meeting due to the recent slide in oil prices. The next OPEC meeting was scheduled for last Friday, however, on Wednesday OPEC and its allies said they would delay the meeting due to discussions on output levels reaching an impasse with Saudi Arabia. Instead of meeting last Friday, the Ministrial meeting will take place this Thursday. The reports from Bloomberg say the Saudis were dissatisfied that other OPEC countries were not scaling back production. It appears a supply cut is being discussed but details have yet to be finalized.
  • The minutes from the Federal Reserve’s most recent FOMC meeting on November 1 showed the committee still had not started discussion on any potential for rate cuts. It said officials agreed to proceed carefully with interest rates and that officials wanted rates to remain restrictive for some time given the possibility that inflation could remain persistent or even bounce back after recently cooling. The officials agreed that policy decisions going forward will remain dependent on the totality of the incoming information and the balance of risks, but said further tightening will be on the table if progress toward inflation proves to be insufficient.

Did You Know…?

Slow M&A Year

According to a report from First Trust, data from Refinitiv shows global M&A (merger and acquisition) activity was $2.38 trillion year-to-date as of October. This was a 20% decline compared to the same period in 2022. The data shows there have been 62 mega deals, defined as transactions valued at least $5 billion or more, which was down from 69 from 2022. The Americas saw the highest M&A value, at $1.31 trillion, over this period. The lower activity is most likely a result of higher interest rates combined with macro uncertainty and cautious forecasts.

WFG News

Medicare Open Enrollment

Medicare Open Enrollment period runs from October 15 to December 7 each year
  • During this period, individuals are able to make changes to their current Medicare coverage. Individuals on Medicare should receive an Annual Notice of Change and/or Evidence of Coverage for Medicare Advantage or Part D plan. This is a good time to review coverage, as medical needs, benefits, and premiums may have changed over the year. During this time here are some things to consider:
  • Will your primary doctor still accept you Medicare Advantage Plan?
  • Have your medical needs changed? Different plans offer different benefits and different costs
  • Are there comparable, lower cost plans available? Don’t forget to consider out-of-pocket costs when comparing options
  • Are you medications still on your plan’s list of covered medications?
  • You can compare plans online with the “Plan Finder” tool at medicare.gov
  • You can input medications and it will show estimated costs, including copayments and coinsurance.

Toys for Tots Toy Drive

Wentz Financial Group is excited to have partnered with the United State Marine Corp on their Toy for Tots toy drive in 2023. We are collecting toys to be donated to the Marine’s efforts. We will be collecting toys until December 15th, feel free to stop by at any time during our office hours until then!

Career Development Day

Monday, December 18, 2023 – All Day
Do you know someone in high school or college looking to get real life work experience from the finance industry? Wentz Financial Group will be hosting its 3rd Career Development Day at our office on December 18. The day will not only be for those looking to get a first look into financial services field but is open to any student wanting to get their feet in the door of the professional world. Don’t forget to RSVP by responding to this email or calling the office at 330-650-2700.

The Week Ahead

Most of the markets focus this week will likely be on the upcoming economic data. The highlight for the week is data on personal income and consumer spending on Thursday morning. The main focus will be the PCE price index which is the Fed’s preferred inflation reading and is expected to have increased 0.1% in the month with core prices expected to be up 0.2%. Other data releases include October new home sales on Monday, September home prices via the Case Shiller home price index, and a consumer confidence reading on Tuesday, then the second estimate of third quarter GDP on Wednesday. Thursday includes weekly jobless claims and the pending home sales index, and the week wraps up with the PMI and ISM manufacturing survey indexes and October construction spend. Investors will also be focused on several earnings reports including from Intuit, HPE, Workday, CrowdStrike on Tuesday, Five Below, Dollar Tree, Foot Locker, Snowflake, Okta on Wednesday, and Ulta Beauty, Kroger, Dell, and Salesforce on Thursday. OPEC is scheduled to hold its policy meeting this week, after a delay from its originally scheduled meeting on Friday. Recent speculation suggested a broader cut to production was in the works.