Market Synopsis: Equities up, Treasuries mixed, Commodities down, Dollar up, Crypto down
Past Week Events:
- 16 different Federal Reserve speakers addressed the public this week. The unified message that they projected was not what investors were looking for: Rates aren’t going anywhere, and a Federal reserve u-turn is not imminent. This crushed hopes of investors who were made optimistic by the recent CPI print. President of the Federal Reserve Bank of Atlanta, Bostic, explained: "must keep rates at peak" until inflation is on track for 2%.
- Housing starts were released this week, which shows the number of housing projects which began during the past month. Housing starts declined for the month of October. High material costs, labor costs, and possibly even high rates can be attributed to this downfall.
- Leading Economic Indicators(LEI), as the name implies, help indicate the state of the economy. On Friday, those numbers came out and overwhelmingly disappointed and are now down ten months in a row. As a result of this recent decrease, they are now down on a year-over-year basis.
Next Week (November 21):
- Next week is relatively quiet, especially with the Thanksgiving holiday, but we will be getting the FOMC’s meeting minutes. The FOMC, or the Federal Open Market Committee, which regulates financial markets, has regularly scheduled meetings; however, what transpires in those meetings is not released until later. Those minutes can give us valuable information on what they have in store for markets in the future.
- New Home Sales are expected to be released as well on the same day as the FOMC minutes. This will give some further insight into the housing market as this week housing starts performing negatively on factors including high material costs, labor costs, and possibly even a high in rates can be attributed to this downfall.
Market Snapshot:
- The Euphoria which took hold of markets last week has faded away as the S&P closed the week down about half a percent. The change in sentiment comes from “Hawkish” comments from multiple people in the Federal Reserve. Their statements can be essentially summed up as higher rates for longer. Most notably, James Bullard, president of the Federal Reserve Bank of St. Louis, implied rates could rise to 7 percent. This dampened optimism among investors as terminal rate expectations have jumped back up, erasing gains post-CPI print. Furthermore, Leading Economic Indicators (LEI) are underperforming on a year-over-year basis, with the most recent report showing a 10-month consecutive decline. All of these factors worked in unison to put markets on edge.
U.S Equities:
Indexes(Week)
SPX 3,965.34(-0.69%), DJIA 33,745.69(-0.01%), NASDAQ 11,146.06(-1.57%), RUT 1,849.73(-1.75%)
Sectors
- The market as a whole was not able to turn green at the end of the week but both Consumer Staples and Utilities outperformed with about a 1 percent gain each. Healthcare was also able to eek out a slight gain. Consumer discretionary was the worst-performing sector of the week closing down almost 3.5 percent because of concern regarding a still tightening economy.
Individual Stock to Note
- BABA had earnings this week, and the results pleased investors. The stock rallied 7 percent on the fact they beat profits. However, there were still a few lingering concerns regarding the report. BABA may have beaten profit expectations, but its revenue underperformed. They missed specifically in e-commerce sales. Furthermore, there are concerns regarding China’s zero Covid Policy and how that will continue to affect the labor force there. BABA is reflective of the Chinese market as a whole, as investors are still wary.
Treasuries:
- Treasuries or government bonds yield’s dropped significantly last week as the CPI raised hopes of cooling inflation which potentially may translate to lower interest rates. However, hopes of a Federal Reserve pivot were somewhat dampened as many speakers of the Federal Reserve came out with Hawkish sentiment. Yields are still below levels before the CPI print but the 2 year treasury yield is quickly climbing and has recovered a significant amount of drop incurred. The question of inflation and rates still remains a topic for debate in the investing world.
Commodities:
Oil
- Oil had a miserable week closing the week out at about 80 dollars a barrel, reaching lows of 77 dollars a barrel. The commodities market as a whole struggled. Oil underperformed, especially because of beliefs of receding energy demands.
Gold
- Gold has somewhat cooled and finished the week lower but still maintaining about 1750 dollars an ounce. Prospects of continued rates rattled the commodity.
Crypto:
BTC -16,587, -1.11% ETH - 1,204, -4.83%
- Bitcoin and cryptocurrency has had a horrible meltdown in the past two weeks highlighting the damage FTX caused the entire cryptocurrency world. The question now remains in the fundamental strength Bitcoin and cryptocurrency has, and how quick can we see a reversal to 20,000 and even looking in the long run when will Bitcoin return to past year highs.
Bitcoin chart
- It was recently reported that approximately 477$ million in crypto assets were stolen from FTX wallets, but it is now suspected that the Bahamian government seized this money. Sam Bankman-Fried allegedly was directed by Bahamian regulators to move money out of FTX into Bahamian possession, and that money is now in the custody of the Bahamian government. There are currently legal issues going on because FTX filed for chp. 11 bankruptcy but money was seized by the Bahamian government, the whole situation is still undergoing.
- El Salvador is allegedly planning to start investing in 1 bitcoin per day. This is part of a further development to bring cryptocurrency to another level by expanding it universally and not just in the powerhouses of the world.
Europe:
Stoxx 600- 433.33, 0.25% DAX -14,431, 1.46% FTSE 100 -7,385, 0.92%
Chart of the DAX (5-day)
Stoxx 600 rallied Friday to end the week up 0.25%.
- The Stoxx 600 is down approximately 11% on the year. This can be understood by a fear that aggressive inflation policies would cause a recession already feared due to the Ukraine war. During the European Central Bank’s policy meeting a few policymakers stated that even more serious monetary policy will need to occur as they need to contract growth in the economy to cool down the fire of inflation.
- There was recent fright after a missile struck a Polish village and killed two civilians. Although there was immediate panic it was soon discovered that these were not deliberate attack missiles to Poland, but only some sort of mistake coming from the Ukrainian war. Although no important effects came out of this, this event was very frightening for the time it lasted because an attack on Poland, a nato country, would immediately bring the United States into conflict with Russia.
Asia:
XJO (Australia)-7,151, -0.09% Shanghai 180 Index-8,081, 0.55% Nikkei 225- 27,970, -0.18%
XJO 5-day Chart
- Japan’s core inflation rates seek 40-year highs as CPI reports came higher than expected. Recently the Japanese economy has been getting beat up highlighted by the YEN and how it is trading very low, and investors will be carefully watching to see how they react. The Japanese are known for their very loose monetary policy, but with their inflation being at a 40-year high it would be self-inflicted damage for them to not see this as a moment to be taken very seriously and as an indication that there needs to be immediate action.
- The current Japanese inflation situation further expands and exacerbates the inflation crisis that has been creeping upon the entire global economy. As we know, the United States has been dealing with this issue with an aggressive approach, and the UK and Europe is also feeling the pain with an expected UK recession coming soon.
Sources Cited
Schneider, Howard. “Fed’s Bullard: Even ‘dovish’ Policy Assumptions Require More Rate Hikes.” Reuters, 17 Nov. 2022, www.reuters.com/markets/u
s/feds-bullard-even-dovish-policy-assumptions-require-further-rate-increases-2022-11-17.Robb, Greg. “Economy May Be in a Recession Already, Conference Board Says, After Leading Index Drops for Eighth Straight Month.” MarketWatch, www.marketwatch.com/story/economy-may-be-in-a-recession-already-conference-board-says-after-leading-index-drops-for-eighth-straight-month-11668784831. Accessed 18 Nov. 2022.Bartash, Jeffry. “Housing Starts Fall Again as High Mortgage Rates Scare off U.S. Home Buyers.” MarketWatch, www.marketwatch.com/story/housing-s
tarts-drop-4-2-as-high-mortgage-rates-scare-off-home-buyers-11668694055. Accessed 18 Nov. 2022.
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