The Shrinking Down Payment

Here's one way in which homebuying has changed dramatically over the years. Data published yesterday by the National Association of Realtors shows the median percent down payment among both first-timers and repeat buyers is essentially half what it was just 30 years ago.

In 1989, the median down payment among all buyers was 20 percent, according to NAR. In 2016 it’s down to 10 percent. Among first-time buyers it’s all the way down to 6 percent.

About half of first-time buyers - 49 percent - said that student loan debt made saving for a down payment difficult. Student loans weren’t the only impediment, though: 40 percent of all buyers said credit-card debt had delayed saving for a down payment or a home purchase.

Scary Levels of Spending

Did you spend a lot of money getting ready for today? According to the National Retail Federation’s annual survey conducted by Prosper Insights & Analytics, total spending for Halloween is expected to reach $8.4 billion, an all-time high in the survey’s 11-year history.

More than 171 million Americans planning to partake in Halloween festivities this year in one way or another. U.S. consumers are expected to spend an average of $82.93 apiece, up from last year’s $74.34.

According to the survey, consumers plan to spend $3.1 billion on costumes, which will be purchased by 67 percent of Halloween shoppers. They'll also spend $2.5 billion on candy, $2.4 billion on decorations and $390 million on greeting cards.

Inside the Third Quarter GDP Growth

The U.S. economy expanded at a seasonally adjusted annual rate of 2.9 percent in the third quarter of 2016, the Commerce Department said this morning. That's not just an increase from the second quarter’s 1.4 percent pace but the strongest quarter of growth in two years.

Exports jumped in the third quarter at a 10.0 percent annual pace, boosted by a summer surge in soybean exports. Imports rose at a more modest 2.3 percent rate; overall, net exports contributed 0.83 percentage point to last quarter’s GDP growth rate.

Consumer spending slowed to a 2.1 percent annual growth rate from the second quarter’s robust 4.3 percent reading, but spending on durable goods remained strong. In all, personal-consumption expenditures added 1.47 percentage points, or almost exactly half, to the quarter’s 2.9 percent growth rate for total GDP.

Americans Are Almost the Most Generous

The U.S. is the second most generous country in the world, according to the U.K.-based CAF America, an international nonprofit organization. But the country in first place may surprise you - it's Myanmar, where 70 percent of people (up from 66 percent last year) say they have helped a stranger, volunteered their time or given money to a charity in the past year.

The U.S. came in second place with a score of 61 percent, unchanged from 2015. In the U.S., 63 percent of Americans said they donated money to a good cause while 43 percent said they volunteered time and 73 percent said they helped a stranger.

Myanmar’s ranking is largely driven by high levels of participation by donating money (91 percent) and volunteering (55 percent). The World Giving Index surveyed 148,000 people in 140 countries.

Consumer Confidence Slipping

The confidence of Americans in the U.S. economy fell in October to a three-month low, just ahead of the presidential election. The primary driver of the decline was that more consumers are saying that jobs are a bit harder to find.

Consumers' perceptions of both current conditions and the six-month outlook dimmed. The future expectations index also fell significantly, to the.the lowest level it's been at since July.

In addition, the September confidence number, which was initially thought to be a nine-year high, has now been revised lower. It still hit a one-and-a-half year high, but is no longer thought to have reached pre-recessionary levels.

Let's Make a Deal - A Big One

For reasons, no one has really been able to explain, deal making just had its biggest week since the dot-com boom. More than five multi-billion dollar deals were announced this past week, totaling $207 billion in deal volume globally. That’s the biggest week since 1999, according to data provider Dealogic.

The biggest one is AT&T’s blockbuster $85.4 billion deal to buy Time Warner, the largest acquisition announced this year. The trend also includes British American Tobacco PLC’s proposed deal to buy the rest of Reynolds American for about $47 billion.

And the deals aren't over yet. Chip maker Qualcomm is expected to announce as early as this week its purchase of NXP Semiconductors, worth roughly $40 billion.

New Record for Income

Here's another statistic showing the economy on the right path: The inflation-adjusted weekly income of the typical full-time American worker hit an all-time high in the third quarter of 2016, according to data released last week by the Bureau of Labor Statistics.

Median weekly earnings of the nation's 112.8 million full-time wage and salary workers were $827 in the third quarter of 2016. That was 3.0 percent higher than a year earlier.

Median weekly earnings had been approximately stagnant for the first 15 years of the 21st century,  but earnings have rebounded sharply over the past 18 months. That’s the result of a mix of an improving labor market, giving workers additional bargaining power, and cheap energy prices keeping inflation low.

The Business Banking Slowdown

Banks are beginning to feel the impact of a slowdown in commercial lending, with regional lenders taking the hardest hit but growth slowing across the board. Commercial lending slipped 0.1 percent by  in the July-to-September period. That's not much, but it's  the first drop in six years. Some specific examples: 

• Fifth Third Bancorp said Thursday that its commercial and industrial loans fell 2 percent since the prior quarter. 
•  Comerica's average loans fell by $331 million at the business bank in the third quarter.  
• BB&T  said that average balances on its commercial and industrial loans fell by 1.1 percent in the third quarter. 
• Regions Financial's business-lending balances fell by $979 million to $50.2 billion, leading a drop of 1 percent in average loans and leases across the bank.

Charging It, Still

The humble old credit card isn't just holding its own with new forms of payment - its use is actually growing. That's what consultants at Accenture PLC found when they surveyed over 4,000 American and Canadian consumers in July. Credit cards were the only form of consumer payments used to pay in person becoming more commonly used, versus cash, debit cards, and—surprisingly—mobile phones.

The percentage of people using credit cards weekly jumped from 50 percent in a survey last year to 53 percent this year. That contrasts to a flat 19 percent usage rate for mobile devices, and slight drop from 59 percent to 58 percent for debit cards.

The biggest loser in all of this has been cash. The percentage of people who use cash at least once weekly has dropped from 67 percent last year to 60 percent now.

What's Driving Inflation

U.S. consumer prices recorded their biggest gain in five months in September. The biggest drivers of the increase? The cost of both gasoline and rents surged.

The Consumer Price Index increased 0.3 percent last month after rising 0.2 percent in August. For the 12 months through September, the CPI has risen by 1.5 percent, the biggest year-on-year increase since October 2014. The CPI rose 1.1 percent in the year to August.

The so-called core CPI, which strips out food and energy costs, gained 0.1 percent last month after climbing 0.3 percent in August. Rents, which account for a larger share of the core CPI, recorded their biggest monthly increase in nearly 10 years.

Bouncing Off the Bottom

It's hard to recall now, but eight months ago, the markets bottomed out and it looked like 2016 was going to be a rough year. Since the S&P 500 reached its low point on February 11, several stocks have shown incredible gains.  Amazon tops the list with a 63 percent rally in the stock and a whopping $153 billion increase in its market cap.

The other leading S&P stocks since that market bottom:

• Qualcomm, up 52.8 percent
• Charter Communications, up 46.0 percent
• Bank of America, up 43.4 percent
• Intel, up 32.7 percent
• IBM, up 31.1 percent

Mutual Funds in the Third Quarter

The mutual fund leaderboard for the third quarter is now out, and it was a good quarter for investors. There was money to be made in every category.

Here are the median return for funds in each category:

• Small-cap growth: 7.6 percent
• Small-cap value: 7.2 percent
• Small-cap blend: 6.8 percent
• Large-cap growth: 5.7 percent
• Mid-cap value: 4.7 percent
• Mid-cap blend: 4.6 percent
• Mid-cap growth: 4.5 percent
• Large-cap blend: 3.8 percent
• Large-cap value: 3.5 percent

Earnings Season Looking Grim

Earnings season started this week, and it's off to a very uninspiring start. And things could get worse before they get better. Alcoa, the traditional kickoff stock for each earnings quarter, delivered weak third-quarter results, and its stock dropped 11 percent on the day - its biggest one-day loss in five years.

S&P Global Market Intelligence warned that earnings season is likely to suffer as a result of tepid growth, which was down 1.2 perecnt for the third quarter. S&P expects the consumer-discretionary sector to report its lowest quarterly results since 2012

Overall, S&P 500 companies are expected to post their sixth straight quarter of declining earnings, according to FactSet.  Alcoa could be just the beginning.

Quitting Is Good!

Here's another economic indicator that is back to where it was before the recession: people quitting their jobs. The share of employees voluntarily leaving their jobs compared to total separations is back at post-recession highs.

The Bureau of Labor Statistics on Wednesday announced that in August, the share of total quits in relation to separations — voluntary or not — jumped to 60.2 percent, matching the post-recession high reached in December. In other words, nearly two-thirds of job separations were people voluntarily quitting rather than getting laid off or fired.

Why does that matter? A higher quits rate sends a positive message about the labor market because people are more likely to quit their jobs if they feel confident about finding a new one quickly, or if they already have another offer. It could also suggest that workers are leaving their jobs for better-paying ones, making it a predictor of wage growth and inflation.

Investor Optimism Keeps Growing

Optimism among U.S. investors in the third quarter of 2016 has reached heights not seen since before the recession. The Wells Fargo/Gallup Investor and Retirement Optimism Index has now climbed to +79, an increase of 17 points from the second quarter after a 22-point gain from the previous quarter. The index is now at its highest point since July 2007.

The third quarter marks the first time the index has risen above +70 since the recession. The index went from +48 in the fourth quarter of 2014 up to +70 in the second quarter of 2015, but then dropped back down to +40 in the first quarter of this year.

The largest gains were seen in optimism among retired investors. Significant gains in retirees' outlook for both their personal finances and the national economy pushed their overall index from +45 in the second quarter to +81 in the third.

Why Utilities Stumbled

Utilities is generally the sleepiest of the S&P 500's sectors, but it caused a bit of a commotion yesterday when it rose by just 0.8 percent on Monday. That broke an 11-session losing streak that went down as the longest in records going back to 1990.

There's a reason that utilities had been suffering recently. The sector is known mostly for paying out above-average dividend income and has thus fallen when bond yields rise. The problem in the past couple of weeks is that bond investors are beginning to expect the Federal Reserve to lift interest rates.

That ended yesterday, when utilities outperformed the 0.5 percent increase in the overall S&P. Still, the utilities sector is down 3 percent for all of October.

The Stress of Success

Does being wealthy stress you out? Money and education confer plenty of advantages in life, and research has long shown that people with them live healthier, longer lives and tend to have more stable, less-monotonous jobs - but apparently, with more stress, too.

In a recent study, Penn State University researchers gave 122 workers living in a northeast U.S. city Palm Pilots to carry with them on the job. Several times a day, the handheld computers prompted them to rate how stressed and how happy they felt.

People with higher incomes and levels of education reported being about 28 percent more stressed and 8.3 percent less happy overall than did workers with lower incomes and levels of education. In addition, those higher-status workers—those in the top fifth of a combined measure of income and education, tending to earn at least $100,000 a year—also reported having more trouble meeting the demands of their jobs.

September Jobs Report

The September employment report is out this morning, with the Bureau of Labor Statistics reporting that the economy created 156,000 jobs in the month. Private-sector payrolls added 167,00 jobs, while  government payrolls fell by 11,000. The unemployment rate ticked up to 5.0 percent from 4.9 percent.

That makes September a slow month, but not really out of line with what we've seen this year. Thus far this year, job growth has averaged 178,000 per month. That compares with an average of 229,000 per month in 2015.

The strongest sector was professional and business services employment, which rose by 67,000 in September and has risen by 582,000 over the year. Health care added 33,000 jobs in September and has added 445,000 jobs over the past 12 months.

Optimistic but Wary

Here's a paradox that is affecting the mind-set of today's investors: They are more optimistic about the stock market than they’ve been in nine years, since before the market collapse of 2008-09. But at the same time, they’re also moving more money into cash and CDs.

The latest Wells Fargo/Gallup Investor and Retirement Optimism Index gained 11 percent in the third quarter. Slightly more than half of investors are now “very” or “somewhat” optimistic  about the 12-month outlook for markets, up from 42 percent last quarter.

But an almost equal percentage of respondents are more worried about stock market volatility than low interest rates, and 43 percent reported they have moved money to cash or cash equivalent savings over the past year. That’s substantially higher than the 29 percent who moved funds into individual stocks or stock funds.

The Rising Price of Stock Shares

The era of the stock split appears to be comping to an end. So far in 2016, only five companies in the S&P 500 stock index — and only 63 among more than 10,100 U.S. companies tracked by S&P Dow Jones Indices — have split their shares. This year is on track to be the third-lowest for stock splits in modern history, behind only 2009 and 2010, when companies were too traumatized by the financial crisis to dare lowering their share prices.

One result of this is that the price of stock shares has gone markedly higher. After decades of remaining in a range between $25 and $45, the average price of an S&P 500 stock has risen to a near-record $86 per share.

So you should get used to single-share prices that look like sizable investments. It’s not just Berkshire Hathaway, at more than $217,000; there’s also homebuilder NVR, at more than $1,640; Priceline Group, near $1,500; and Alphabet, the parent of Google, over $800.

Third Quarter's Big Winners

In the midst of a pretty solid third quarter, there were several stocks in the S&P 500 that really shone. Ten of the stocks in the index returned a whopping 30 percent or more in the third quarter alone. Those stocks:

1. Seagate Technology, up 61%    
2. NetApp, up 47%    
3. Chesapeake Energy, up 46%    
4. Nividia, up 46%    
5. Williams Cos., up 43%    
6. eBay, up 41%     
7. Nordstrom, up 37%    
8. Autodesk, up 34%   
9. State Street Corp., up 30%    
10. American Airlines Group, up 30%

Third Quarter Scorecard

The third quarter, which concluded on Friday, was a big one for the stock markets. The S&P 500 ended the third quarter up by 3.3 percent, making the index up by 6.1 percent so far in 2016 overall.

The Dow Jones industrial average also had a solid quarter, though it's still trailing the S&P. It rose 2.1 percent on the quarter, and is now up by 5.1 percent on the year.

But the real excitement was in the Nasdaq. The tech-heavy index was up 9.7 percent in the third quarter, its best quarterly performance since 2013. Because of losses earlier in the year, though, the Nasdaq is up by just 6.1 percent in 2016 overall.