The market is trying to figure out how to cope with rising interest rates. The 10-year US treasury climbed above 3.2% thanks to strong economic reports. Wall Street is trying to factor in the effects of rates moving up faster than expected. At the close the Dow was off 180 points to 26,447. Trading volume was lower on the day. For the week the Dow was down a fraction.
September’s labor report was good and bad. The number of new jobs came in at 134,000 which was less than the 180,000 that was expected. The unemployment rate however fell to 3.7% which was better than estimates calling for a reading of 3.8%. The reading of 3.7% was to lowest in 48 years. Average hourly earnings rose 2.8% in line with expectations. In other economic data, the ISM non-manufacturing service sector index hit 61.2 which is the second highest reading for that index since its inception. 17 of 18 industries reported growth and forward looking “new orders” reading also moved up as did the employment index. Brian Wesbury, economist at First Trust in Chicago and honorary member of the Westport Mafia called the report “strong”.
Shares of beloved Seattle retailer Costco (“Costcos” as my mother in law calls it) fell after reporting earnings that missed expectations. The company posted a 5% revenue increase and a 13% increase in net income. Online sales were up a healthy 26.2% but the gurus were worried about an announcement by the company of “material weakness” related to changes being made in the IT systems used for financial reporting. Costco continues to grow overall retail sales faster than industry averages but is getting some competition from Walmart which is seeing faster growth in online sales than Costco. Overall the analysts are saying that any weakness in Costco should not take away from the long-term positive story.
The Boy Scouts this weekend are headed to the Blewett Pass area for our annual Andy’s Cabin outing. The lunkheads will throw axes, fling arrows, climb clifts, cook meals, and conduct chemical experiments where they use expanding gasses to push small pieces of lead down metal tubes. A good time should be had by all. Hopefully it will rain.