EC Time For Pie

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DOW + 12 = 17,827
SPX + 5 = 2072
NAS + 29 = 4787
10 YR YLD – .03 = 2.23%
OIL – .35 = 73.75
GOLD – 3.20 = 1199.00
SILV – .13 = 16.64

Another record high close for the Dow Industrial Average and the S&P 500 index. That’s the 47th record high for the S&P this year. Volume was light, heading into the holiday. The markets will be open for a half day on Friday, but volume will be incredibly light.

Yesterday we told you about the New York Fed report that consumers were taking on more debt; household debt increased $78 billion in the third quarter, and the NY Fed thought that meant the end of deleveraging. It was the end of an era. Good news for the economy as well. American households have been cleaning up their finances during the painful post-crisis era, with less debt and lower financing costs for the debts they still owe. They are now in a better position to spend in the years ahead, good for the economy and their own sense of well-being.

I said “not so fast”, let’s wait and see if a trend develops. Today, the Commerce Department reports consumer spending increased 0.2 percent last month after being flat in September. Maybe Americans have cleaned up their debt problems, or not, but we aren’t yet in a spending mood. The amount of money individuals save was flat at 5%, but the saving rate was revised down sharply to 5% in September from a first read of 5.6%.

Meanwhile, inflation as gauged by the PCE price index rose 0.1% last month, while the core rate excluding food and energy climbed 0.2%. And over the past 12 months this gauge of inflation is up just 1.4%, well below the Fed’s target of 2%. Annual price gains have undershot that target since April 2012. The Fed, in its Oct. 29 policy statement, said that “inflation in the near term will likely be held down by lower energy prices and other factors,” though it’s expected to move back toward 2% over time as the economy heals.