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David Becker

US stock prices rallied on Friday, allowing all three major indices to hit record highs. Commentary from National Economic Advisor Larry Kudlow helped repair sentiment and buoy stock prices. Healthcare stocks led the charge, following a press conference where President Trump praised a plan to reduce healthcare costs. US Retail sales came out stronger than expected, while Industrial production disappointed. The VIX volatility index, which measures the implied volatility of the “at the money” strike prices on the large-cap S&P 500 index, fell nearly 7% on Friday, but was up approximately 1% for the week. Most sectors were higher, led by healthcare and energy, materials bucked the trend. US treasury yields eased with the 10-year slipping down to 1.84% for the week.

Headline Retail Sales Beats, the Core Misses

The US Commerce Department reported on Friday that headline retail sales increased 0.3% last month, lifted by motor vehicle purchases. Expectations were for retail sales to rise by 0.2% on October. Retail sales increased 3.1% year over year. Excluding automobiles, gasoline, building materials and food services, retail sales increased 0.3% last month. Auto sales increased 0.5% in October after declining 1.3% in September. Receipts at service stations surged 1.1%, reflecting higher gasoline prices, after dipping 0.1% in the prior month. Online retail sales increased by 0.9% after gaining 0.2% in September. Sales at electronics and appliance stores fell 0.4%. Americans also cut back on spending at restaurants and bars, with sales falling 0.3%.

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Industrial Production Drops

The Federal Reserve on Friday reported that U.S. industrial production dropped 0.8% in October, the largest decline since May 2018. It was the third decline in output in the past four months. The drop was steeper than expectations of a 0.5% fall. The report was impacted by the United Auto Workers strike at General Motors which pushed down auto production by 7.1%. Excluding autos, industrial production was down 0.5%. Manufacturing output fell 0.6% in October. Manufacturing ex-autos in October was down 0.1%. Industrial capacity in use slumped to 76.7 in October. That’s the lowest level in 25 months.

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