Market Synopsis: Equities up, Treasuries up, Commodities up, Dollar down, Crypto down
Past Week Events:
- Midterm Elections were held this week on Tuesday. Midterm elections are important in deciding control of the two houses of Congress, the House and the Senate. Elections were indecisive and full of uncertainty. A “red wave” was expected, meaning that Republicans were expected to dominate; however, that did not come to fruition. For a full breakdown take a look at our recent post about the midterms and their impact on financial markets.
- CPI or the Consumer Price Index came out this Thursday. CPI is a central measure in measuring inflation. CPI, measures specifically changes in prices of consumer goods and services. CPI came out under expectations sending markets up. A cool down in inflation is what many investors have been expecting as it could signal a slow down in the Federal Reserve’s hiking of interest rates.
- Jobless claims were announced this Thursday and increased. However, the number is still low historically speaking. Claims remain low despite corporate layoffs from companies like Twitter and Meta.
Next Week (October 31):
- Retail sales for the month of October will give investors insight on how the retail markets have been faring considering rising interest rates. In September, retail sales increased. This will also be an interesting data point considering holiday spending that is catching up on many Americans.
- Jobless claims or unemployment claims measure those who are requesting unemployment benefits and those who are unemployed and continuing to receive benefits. The labor market has been on a recent upward trend, and the Federal Reserve has planned to start considering quantitative tightening in the market (quantitative tightening= dampen the economy). They are planning to do this to further ease inflation and the side effects that come with it.
- Housing starts will be released, which is the number of housing projects begun during the past month. September showed a downtrend in the housing market, which has been a recurring theme since summertime, despite the fire the housing market has shown in the last few years. A high material cost, labor cost, and possibly even a hike in inflation rates can be attributed to this downfall.
Market Snapshot:
- Markets were euphoric this week having their best week since Nov 6th 2020. The themes of the week were slowing inflation, possible easing of Chinese COVID lockdowns, and possible Russia/Ukraine peace talks. CPI came out Thursday sending the S&P up about 6 percent! There was carnage in the crypto markets. FTX, a major crypto currency exchange, faced liquidity issues and bankruptcy this week. FTX’s possible collapse prompted panic causing Bitcoin to fall to about 15,000 dollars. However, equities were largely unaffected and continued their euphoric rally.
U.S Equities:
Indexes(Week)
SPX 3,992.93(5.90%), DJIA 33,747.86(4.15%),
NASDAQ 11,323.33(8.10%), RUT 1,882.74(4.60%)
Sectors
- All sectors participated in this week’s euphoric rally. Utilities was the slowest “only” gaining 1.4 percent. Technology, on the other hand, outperformed all other sectors rising about 10 percent on the week.
Individual Stock to Note
- Amazon, if you will remember, tanked on dismal earnings dropping over 20 percent at one point on Thursday evening. Its earnings were atrocious with terrible profit margins. Both its online retail business internationally and within North America were not able to turn a profit. Their guidance or projections for the future were also not very optimistic. However, with Thursday’s excellent CPI print Amazon shot up about 10 percent recovering some losses it had incurred over the past week after earnings.
- The past year’s increase in yields has given bonds a significance they have not had in recent years. Expecting that the government will keep inflation under control in the near future, bonds are something investors are heavily looking at. Investors are starting to grow a lot more fond of bonds compared to the traditionally favored stock market. The market's recent challenges can explain the fear investors are growing in the market. The term TINA (There is no alternative) to making risky investments should be reconsidered, because bonds are back in the game.
- Mortgage rates showed excitement off of Thursdays release of CPI, which actually showed high hopes for cooling down inflation. The 30-year mortgage loan average dove 46 bps (-0.46%).
Commodities:
Oil
- Oil finished the week in the red. However, it was able to have a few green days possibly in response to the rumors that China may begin easing its COVID lockdowns.
Gold
- Gold reached three month highs rising to $1770 as investors flocked to it in response to FTX’s collapse and crypto carnage.
BTC -17,000, -19.61% ETH - 1,291, -21.62%
- Bitcoin chart
- Cryptocurrency and Bitcoin had a massive week following the crypto exchange FTX losing all of their capital and filing for bankruptcy today. Bitcoin and ETH are both down about 20% reflecting this crisis. This week was especially important for Bitcoin considering how it has been above the rock solid level of 20,000, which took BTC a while to break through. This push right back down will be a testament to Bitcoin’s strength and ability to persevere through tough times like this.
- FTX has just filed for bankruptcy, their CEO Sam Bankman-Fried resigned, and Binance pulled out of their intent to buy FTX and revive them out of their bankruptcy. Let's dive into why this all happened.
FTT is an original cryptocurrency of the crypto trading platform FTX. Mr. Bankman-Fried, former CEO of FTX, also runs a hedge fund called Alameda Research, and it was speculated that Alameda Research held a suspiciously high amount of FTT even though these two companies are supposed to be completely separate, indicating Bankman-Fried may have been messing around with FTX’s capital. Due to these speculations, Binance said they would be selling all their FTT which then caused FTT to plummet. In response to FTT’s plummet, investors in FTX looked to immediately withdraw their money invested within the company but due to an overwhelming amount of withdrawal requests FTX no longer held capital to fulfill them and went into a liquidity crunch.
- Sam Bankman-Fried
Europe:
Stoxx 600- 432.26, 3.66% DAX -14,224, 5.68% FTSE 100 -7,318, -0.23%
- Europe had the best week since March, highlighted by the DAX index rising 5.68% . This can be attributed to Asia’s easing of their pandemic rules and the United States’s better-than-expected CPI data.
- Chart of the DAX (5-day)
- The UK’s economy is indicating a possible recession, and the rest of Europe may follow. The G7 economies are a group of the world's largest Westernized economies, including the United States and the UK. The UK’s economy diminished in the third quarter, and it is the only G7 economy to do so. This is a major sign paving the way for a recession in Europe.
Asia:
XJO (Australia)-7,158, 3.85% Shanghai 180 Index-8,036, 1.23% Nikkei 225- 28,020, 2.37%
- Asian indexes continue to rise following the “Zero-Covid” policy where China looks to ease pandemic rules and policies. Europe even felt the effects of this policy, showing the euphoric excitement that everyone feels knowing that all the stressful policies the pandemic brought will finally be left in the past.
- XJO 5-day Chart
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