The September US jobs report, delayed by the government shutdown, revealed that only 148,000 jobs were added last month, far fewer than the 180,000 estimated. The weaker-than-expected result led investors to conclude that the US Federal Reserve will not be tapering its monetary stimulus soon. As a result, stocks gained, the US dollar weakened and the price of gold rose.
Global economic news was positive. China’s manufacturing gauge strengthened to a seven-month high, the United Kingdom reported 3% annualized economic growth in the third quarter, and Spain broke out of its two-year recession last quarter, according to its central bank’s preliminary estimate.
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Earnings reports were strong overall. To date, 66% of companies in the S&P 500 Index that have reported results have beaten earnings expectations, and 54% have topped revenue estimates. Meanwhile, banking giants JPMorgan Chase and Bank of America will have to pay dearly for fraudulent or misleading activities relating to mortgages and mortgage investments during the housing bubble. JPMorgan agreed to a $13 billion settlement with the US Department of Justice, while BofA could pay up to $848 million in fines.
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The September US jobs report, delayed for two weeks by the federal government shutdown, indicated weaker-than-expected job growth, with only 148,000 jobs added, well below the average estimate of 180,000. However, the jobless rate fell slightly, to a five-year low of 7.2% from 7.3% in August. The survey was conducted before the government shutdown put 800,000 federal employees on furlough. The tepid numbers makes it likely the Fed will push back its plan to taper its stimulus program. Weekly initial jobless claims dipped by 12,000, to 350,000, for the week ended October 19th.
The UK economy grew at its fastest pace in three years in the third quarter. The Office for National Statistics said in its preliminary estimate that gross domestic product rose 0.8% from the previous quarter –– 3.2% on an annualized basis. GDP was 1.5% higher than a year earlier. All four main economic sectors –– services, industrial production, construction and agriculture –– grew, indicating a broad-based recovery.
China’s home prices rose 9.1% in September from a year ago, the biggest increase in three years, according to the National Bureau of Statistics. Prices rose 16% in Beijing, 17% in Shanghai and 20% in Guangzhou and Shenzhen. The Chinese government remains concerned about a possible property bubble but is trying not to respond too aggressively, as property is a key growth area for the country.
China’s flash manufacturing PMI rose to 50.9 in October from a final reading of 50.2 in September. The reading is the highest in seven months and points to growing momentum, backing up the third quarter’s slight increase, to 7.8%, in annual GDP growth.
JPMorgan Chase reached a tentative $13 billion deal with the US Justice Department to settle several outstanding probes of its residential mortgage-backed securities business. The government might still pursue a criminal probe of the bank’s conduct, which could lead to charges against the bank or its employees. The deal includes $4 billion to settle claims by the Federal Housing Finance Agency that the bank misled Fannie Mae and Freddie Mac about the quality of loans it sold them before the 2008 financial crisis. It also includes $4 billion in consumer relief and $5 billion in penalties.
Bank of America was found liable for fraud on claims related to defective mortgages sold by Countrywide Financial, which BofA bought in 2008. Countrywide originated substandard home loans in a process called “the Hustle.” The nickname was based on an acronym –– HSSL – that referred to “High Speed Swim Lane.” The Justice Department is seeking an award of up to $848 million.
Social-networking company Twitter plans to price its initial public offering at $17 to $20 per share, which would value the firm at about $11 billion and raise up to $1.6 billion. This comes during a banner year for IPOs, with the greatest number of US-listed IPOs since 2007. After a 10-day road show to promote the offering, Twitter will settle on a price before shares begin to trade on the New York Stock Exchange on November 7th.
