It was a strong week for U.S. economic data. The initial estimate for annualized real GDP growth in the third quarter was a strong 3% despite the disruptions expected from Hurricane Harvey and Irma. September durable goods orders remained strong with an increase of 2.2% – bolstered by defense aircraft orders. In other good news, the technology giants Microsoft, Google, and Amazon all had positive earnings reports. Continued signs of recovery and growth were also visible in Europe as the European Central Bank announced it would slowly be pulling back on its bond buying but being careful to note that the process will be open-ended.
All of the positive news on the domestic front pushed U.S. stocks higher and bond prices lower as bond yields moved significantly upward mid-week with the 10-Year Treasury topping out at 2.48%. This is a definitive shift in sentiment from early September when the markets were processing weak inflation and a potential slowdown from the natural disasters that hit during the month. U.S. stocks, particularly small cap stocks, moved higher on this news as well as hopes that corporate tax reform will prove successful. International stocks took a breather in part due to a decline in the euro and potential fallout from Catalonia’s attempt at independence.