Market Overview Week of October 17

Market Synopsis: Equities up, Treasuries mixed, Commodities mixed, Dollar down, Crypto flat

Past Week Events:

• Housing starts a measure of the construction of residential buildings in the past month, which provides insight into the overall market; specifically about demand in the market. It declined 8.1 percent, not boding well for overall U.S. growth.

• Industrial production index, which helps investors understand the level of production in energy, mining, and manufacturing within the United States. Industrial output increased solidly, an optimistic sign for investors.

• Jobless claims or unemployment claims measure those who are requesting unemployment benefits and those who are unemployed and continuing to receive benefits. Initial claims fell to 214,000 which shows that the labor market is tight, which means that there are many vacant jobs and fewer workers.

Next Week (October 23):

• The S&P Global Manufacturing, Composite, and Services PMI Flashes for the month of October will be released. This is an excellent indicator on the United States’ productivity in manufacturing and service sectors. Despite inflation still affecting the economy, this indicator seems to be on an uptrend trend seen in last month’s report. October’s report will be a good indicator if the market is back on an upward trajectory.

• Personal income and outlays for the month of September will finally be released. This measures consumer spending and saving. Due to inflation, it is expected that this number will wither but August’s reading said otherwise. Investors will be on guard for this month’s personal income and outlay measurement.

• Jobless claims or unemployment claims measure those who are requesting unemployment benefits and those who are unemployed and continuing to receive benefits. This measurement is still low relative to its history which continues to concern the Fed and investors because inflation is still souring. This being a relatively low number means the labor economy is doing well, even though inflation is not doing well.

• New residential sales will be released which indicates the number of new homes sold in the past month.

Market Snapshot:

• Stocks had a volatile week all the way from Monday through Friday. On Friday, however, stocks rallied, having their best week since June. The Wall Street Journal suggested that the Federal Reserve might take its foot off the accelerator and slow quantitative tightening or in simple terms stop raising interest rates so aggressively. This was coupled with intervention by the Bank of Japan in the Yen which sent treasury yields higher. The markets closed out this week on an optimistic note.

U.S Equities:

• Indexes

SPX 3,752.75(4.74%), DJIA 31,082.56(4.89%),

NASDAQ 10,859.72(5.22%), RUT 1,742.24(3.56%)

• Sectors

The energy sector outperformed all other sectors rising over 6% in the week. Every sector turned green except for Utilities which closed slightly below even.

• Individual Stock to Note

Snapchats(SNAP) earnings miss resulted in the stock tumbling over 30 percent as investors are concerned with its slow revenue growth. Expectations were low going to earnings so its miss was a devastating blow to investors. The main issue which caused SNAP’s earnings to disappoint was a decrease in advertising demand which is a primary source of SNAP’s earnings.

Fixed Income:

• The discussion between Fed Evans and Fed Bullard led investors to believe the Fed will have an aggressive approach to hike 75 bps in the short term. In the longer run, the odds of a 75 bps hike in December drop from 70% to 30% and in February the odds of a 50 bps hike increase from 30% to 50%.

• Basis points are used as a simplified measure of interest rate changes. One basis point is equal to 0.01%.

• The main question when it comes to inflation and hiking interest rates is how much is needed, well financial conditions are their tightest since 2009, so this may say something about the Fed's attempt to minimize inflation.

Commodities:

• Oil

Oil bounced around this week but ultimately closed the week flat, around 85$ a barrel, despite Biden’s release of more oil from the strategic oil reserve.

• Gold

Gold had its best day since the start of October rallying 1.5% or 25$ on Friday.

Crypto:

• BTC -19,145, -0.22%, ETH - 1,298, -0.30%

Bitcoin and Etherium stay relatively flat but a little down this past week. Starting November 3, the crypto blockchain platform Tether will be made available in Brazilian ATMs. This is a major step into global development of cryptocurrency for uses that are not only for traders. Tesla’s report released Wednesday indicates that Tesla still holds 218 million dollars worth of bitcoin. Tesla has been recently selling a good chunk of their bitcoin assets, but since the last report in the second quarter of 2022 they have not sold any.

Europe:

• Stoxx 600- 396.29, 1.27% DAX -12,730, 2.36% FTSE 100 - 6,969, 1.62%

Stock 600 graph above. On Friday Europe sold off a little bit due to investors worrying about the current state of European central banks and their hawkish take on inflation. Dull and a little bit worrying earnings reports did not support this sell off either. On Friday, Stoxx 600, a major european index, was down -0.62% highlighting this sell off. The former Prime Minister of England Liz Truss decided to resign. Retail stocks fell 3%, understood by the continuing political turbulence in the United Kingdom.

Asia:

• XJO (Australia)-6,676, -1.21% Shanghai 180 Index-7,908, -2.53% Nikkei 225- 27,140, 1.12%

• Following Europe, Asian stocks were down on Friday due to worries about inflation.

• Speaking of last week's Japanese crisis regarding the Yen and its decades low market value, the Japanese central bank has started to make efforts in calming down the downward spiral the yen is headed in despite the bank’s conservative interest rate policy. Japan’s consumer prices also increased 3% from last year which is an 8 year high, Japan’s economy is at a serious low.

Sources Cited

“Europe News | Latest Headlines and Stories | Reuters.” Reuters, www.reuters.com/world/europe. Accessed 14 Oct. 2022.

Bova, Alex. “Up next for the Markets: October 24 - October 28.” Credit Card, Mortgage, Banking, Auto, 20 Oct. 2022, https://www.chase.com/personal/investments/learning-and-insights/article/up-next-for-the-markets-october-24-october-28.

“Home Page - MarketWatch.” MarketWatch, 14 Oct. 2022, www.marketwatch.com.

“Zerohedge.” Zerohedge, www.zerohedge.com. Accessed 14 Oct. 2022.

“Yahoo Finance - Stock Market Live, Quotes, Business and Finance News.” Yahoo Finance - Stock Market Live, Quotes, Business & Finance News, finance.yahoo.com. Accessed 14 Oct. 2022.

Durden, Tyler. “Fedspeak & Yentervention Spark Buying Panic in Bonds, Stocks, & Gold.” ZeroHedge, https://www.zerohedge.com/markets/fedspeak-yentervention-spark-buying-panic-bonds-stocks-gold.