Market Synopsis: Stocks Down, Treasury Yields Up, Commodities Down , Dollar Up, Crypto Down
Past Week Events:
This Week's Events:
FOMC minutes shed light on potential future rate hikes:
The Federal Reserve's assembly minutes demonstrated that the crucial committee is thinking about a headstrong approach to combating inflation. The minutes suggest that policymakers are discussing the opportunity of multiple rate hikes in the coming months. This comes as inflation is still a problem, with inflation being stickier than thought. The persistence of inflationary pressures has led to a shift in the Fed's policy stance. Policymakers at the moment are considering an extra proactive approach to make sure that inflation does not become entrenched. The minutes also show that the Fed is closely monitoring the labor marketplace, which has continued to be tight. The fact that inflation is still above the long-term goal of 2 percent does not bode well.
Leading Economic Indicators and Recession Concerns
Leading financial indicators, which can be used to predict future economic trends, are displaying signs and symptoms of weakness. The Conference Board's Leading Economic Index (LEI) has been declining for several months, raising issues about a possible recession. However, some economists argue that the current decline inside the LEI might not be an indicator of an impending recession. They point out that other financial indicators, like that of the labor market and consumer spending, remain strong. While the decline in the LEI is a cause for concern, it's important to not forget the wider financial context and different indicators.
Next Week:
The S&P Global Manufacturing and Services PMI Flashes for the month will be reported. These are excellent indicators of the United States’ productivity in the manufacturing and service sectors. Last month’s services PMI was at 52.3, indicating growth in the services industries. The Manufacturing PMI was still below 50 at 49.0 last month, indicating a possible contraction in the manufacturing sectors. These indicators have stayed pretty steady these past few months, so time will tell whether there is a change.
The UMich consumer sentiment index is a survey that asks how people feel about their financial situation, their spending habits, and the economy in general. The last report came in at 71.2%.
Market Snapshot:
This week, markets were marked by interventions by Chinese authorities, including coercing funds not to sell stocks, urging banks to buy yuan against the dollar, and encouraging firms to engage in share buybacks. Despite these efforts, Chinese stocks and the yuan both fell. In the US, somewhat hawkish Federal Reserve minutes pushed rate expectations higher, reducing expectations for cuts next year. The S&P 500 fell for the third straight week, marking its longest weekly losing streak since February. This was the largest weekly loss since the collapse of SVB in March. Small Caps fell the hardest. Treasury yields moved higher on the week with the long-end notably underperforming. The 2Y Yield also surged to 5.00% but failed to maintain that level. The dollar rallied for the fifth straight week, reaching its highest since early June. In the cryptocurrency market, Bitcoin plunged back to pre-Bitcoin ETF headlines. Oil prices fell for the week, marking the first weekly loss since June, with WTI settling at about $80.
Quip of the Week: "Valuation-driven investing involves a great deal of hard work, discipline, and patience. But it has one redeeming feature: it works!" - James Montier
U.S Equities:
Indexes(Week)
SPX 4,369.71(-2.11%), DJIA 34,500.66(-2.11%),
NASDAQ 13,290.78(-2.59%), RUT 1,859.42(-3.41%)
Sectors:
The markets had a bad week, with no sector ending positive. A hawkish federal reserve minutes and Chinese intervention pushed market optimism down. Consumer discretionary is generally highly sensitive to interest rates and market optimism, and so this past week of low market optimism sent consumer discretionary to the of the pile. Energy has had a good run of weeks, but despite this streak, oil prices went down and took the energy sector along with it, despite it ending as one of the top sectors this past week.
Treasuries:
Treasury Yields close to 2007 Levels Amid Economic Concerns
Treasury yields are nearing degrees last seen in 2007, reflecting growing concerns about the nation of the economy. The yield on the 10-yr Treasury note has been steadily growing, driven by factors including inflationary pressures and the Federal Reserve's shift toward a extra hawkish stance. The upward thrust in yields is likewise indicative of traders' expectations of higher interest rates in the future. Current yields are paying homage to those seen in 2007, right before the onset of the global financial crisis. However, experts are warning against drawing direct parallels among the current state of affairs and the events of 2007. The economic context is unique considering stick inflation. Nonetheless, the rise in Treasury yields is something to keep a eye on. It reflects the broader uncertainties and concerns about the trajectory of the economy.
Commodities:
Oil
Oil Prices Decline Amid Concerns Over Weaker Growth in China and concerns of future U.S. Rate Hikes
Oil costs have fallen because of worries about weaker economic growth in China and apprehension about future rate hikes within the United States. China, one of the global's largest oil consumers, has been experiencing a slowdown in growth, which has raised for oil markets. Higher rates may result in a stronger dollar, making oil cost more for consumers using other currencies. The combination of these elements has placed downward stress on oil costs. The decline in oil prices reflects broader issues approximately the worldwide economic outlook and the ability impact of economic policy choices on commodity markets.
Gold
Like most of the market, gold saw a decline this past week. This was mainly due to the raised expectations of higher interest rates. Higher interest rates and gold have an indirect relationship because it increases the opportunity cost of cold, which is non-yielding. ‘It (gold) just does not seem like an ideal asset class in the current environment’
Crypto:
BTC -26,056.30, -11.00% ETH - 1,661.39, -9.66%
BTC Graph (5-day)
Bitcoin took a scary plunge Thursday night, going to pre Bitcoin ETF headline levels. This was because Elon Musk, who is known for his endeavors in the crypto world, and his company SpaceX reportedly sold all of their holdings in cryptocurrency.
Europe:
Stoxx 600- 448.44, -2.34% DAX- 15,574.26, -1.63% FTSE 100 -7,262.43, -3.48%
DAX Chart (5-day)
European Central Bank chief economist Philip Lane recently stated his optimistic stance on the Euro Zone economy for the next couple of years to come. The main reason for this optimism is the argument that the eurozone still hasn't fulfilled its potential from pre-pandemic growth, and with a future of lower interest rates.
Asia:
XJO (Australia)-7,148.1, -2.62% Shanghai 180 Index-8,087.83, -2.13% Nikkei 225- 31,450.76, -3.15%
XJO Chart (5-day)
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