Market Synopsis: Equities up, Treasuries mixed, Commodities mixed, Dollar down, Crypto flat
Past Week Events:
- New Home Sales decreased 10.9% in September taking back surprising increases from last month. This decrease can be attributed to rising mortgage rates which come as a result in the increase in interest rates. The Federal Reserve is responsible for setting interest rates which are used as a means of reducing inflation.
- Unemployment claims climbed slightly higher, but are still relatively low. 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 historical numbers which continues to concern the Federal Reserve, who is responsible for the nation’s financial well being. This being a relatively low number means the labor economy is doing well, while inflation is still holding strong.
- Consumer confidence fell to a three month low. The measure is relatively straightforward measuring the optimism of consumers of the current economy. Factors like inflation and concerns of a recession caused a decrease in confidence.
- The S&P Global Manufacturing, Composite, and Services PMI Flashes for the month disappointed. This is an excellent indicator on the United States’ productivity in manufacturing and service sectors. Despite inflation still affecting the economy, this indicator was illustrating an optimistic uptrend trend seen in last month’s report.
- The PCE index or Personal Consumption Expenditures Price Index which serves as a measure of inflation disappointed showing that inflation is still strong.
Next Week (October 31):
- The month of October’s Unemployment rate is released which reports the amount of Americans who are not currently working. Last month's rate was 3.5%, which is a relatively strong number. The labor market's strong momentum is concerning for investors because it is doing well with inflation being high. This means that if October’s unemployment rate continues to show strength the Federal Reserve will most likely continue to take an aggressive approach on raising interest rates.
- 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.
- Jerome Powell, who is an important figure in the Federal Reserve, will host a press conference regarding raising interest rates to cool down inflation in the market. Recent efforts by the Federal Reserve to calm inflation have been underwhelming considering their expectations, so it is expected that the Federal Reserve will continue to raise interest rates.
Market Snapshot:
Markets in large part had a strong positive week putting the Dow Jones Industrial Average, a major stock market index, on track to have its best year since 1938. This recent optimism and euphoria largely stems from rumors that the Federal Reserve may take a breather in its aggressive monetary policy. Essentially, they may slow down in terms of raising interest rates. This slow down or pivot of their originally aggressive strategies will benefit stocks hugely and bonds. The question on almost every investor's mind right now is what the next steps the Federal Reserve is going to take.
U.S Equities:
Indexes(Week)
SPX 3,901.06(3.95%), DJIA 32,861.80(5.72%),
NASDAQ 11,102.45(2.24%), RUT 1,846.92(6.01%)
Sectors
“A rising tide lifts all boats”, perfectly illustrates this week's individual sector performance. All sectors were solidly positive this week. Industrials, Consumer Staples, Real-Estate, and Utilities were the strongest this week all returning over 6% on the week. Consumer discretionary and Energy lagged behind but nonetheless still maintained over a 1 and 2 percent return respectively.
Individual Stock to Note
Amazon crashed 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. Supply chain issues and inflation were blamed as its chief obstacles in its sales growth. The crash put Amazon where it was at during the COVID pandemic meaning that all gains since then were wiped out. Amazon’s market cap barely exceeds 1 trillion dollars.
- Long-term U.S treasury yields have been progressively rising, with the 10-year yield increasing to 4.22%. This is reaching a 15-year high. Short-term yields are still bouncing around considering the Fed’s approach to tighten control over inflation, with the 2-year yield falling -2bps (bps is a measurement used for interest rates, 1 bps = 0.01%).
- Short-term and long-term municipal bonds (government issued bonds) had a great week. Short-term rose 16bps while long-term rose 23bps.
- Mortgage rates continue to have a rough 2022. Inflation is the main factor into this, with the 10-year fixed mortgage rate laying around 6.5%. Recent years have been hot for the housing market, but since the beginning of summertime its hot streak was beginning to cool off considering the powerful momentum of inflation across the year.
Commodities:
Oil
Oil also finished the week off in the green following stock’s solid gains. Oil was up to around 88 dollars a barrel up almost 4 percent on the week.
Gold/Silver/Copper
The metals, gold, copper, and silver all closed the week out lower around a percent. This decrease can be attributed to a strong week for the dollar.
BTC -20,602, 7.41%, ETH - 1,554, 19.36%
Bitcoin chart
- Considering Bitcoin’s amazing week, Bitcoin mining corporations like Cipher Mining, which rose 43.75%, also rallied throughout the past week.
-Contrary to Bitcoin’s amazing week, one of Bitcoin’s most preeminent mining corporations, Core Scientific, sold off an overwhelming 80% unfortunately bringing bankruptcy conflicts to the corporation.
- Binance, one of crypto's most popular blockchain platforms, admitted they were involved with supporting Elon Musk’s finances by buying Twitter. Elon Musk is known for his involvement with cryptocurrency, and Binance is clearly a supporter.
Europe:
Stoxx 600- 410.76, 3.65% DAX -13,243, 4.03% FTSE 100 -7,047, 1.12%
- Early in the week, European indexes took a hit responding to the European central bank’s decision to raise interest rates by 0.75%.
- Rishi Sunak’s decision to take charge as UK’s prime minister gave the market some hope considering an overall positive week. He gave her first speech which provided the country a sense of optimism and national confidence.
Rishi Sunak
Asia:
XJO (Australia)-6,725, 1.63% Shanghai 180 Index-7,521, -4.90% Nikkei 225- 27,490, 1.29%
- Hong Kong stocks sold off to their low since 2009. This sell-off can be understood by the decision overseas investors made to sell the Yuan. Approximately 18 billion dollars worth of the yuan was sold overseas in response to its recent crisis, it continues to show its feebleness.
- The recent news regarding Xi Jinping’s securing of his third-term as Chinese president also contributed to the sell-off. He continues to grow his political control over the country, with newly appointed loyalists to his regime that now dominate the Chinese governing body.
Sources Cited
Bartash, J. (2022, October 25). Consumer confidence falls to three-month low on inflation and recession worries. MarketWatch. Retrieved October 28, 2022, from https://www.marketwatch.com/story/consumer-confidence-falls-to-three-month-low-on-inflation-and-recession-worries-11666708589?mod=economic-report
Bartash, J. (2022, October 28). U.S. inflation still running hot, key PCE price gauge shows. MarketWatch. Retrieved October 28, 2022, from https://www.marketwatch.com/story/coming-up-pce-inflation-and-consumer-spending-11666959077?mod=article_inline
CNBC. (2022, October 28). Gold down 1% as dollar, yields rise on fed rate-hike bets. CNBC. Retrieved October 28, 2022, from https://www.cnbc.com/2022/10/28/gold-markets-federal-reserve-interest-rates.html
DJIA: Dow Jones industrial average overview. MarketWatch. (n.d.). Retrieved October 28, 2022, from https://www.marketwatch.com/investing/index/djia?mod=home-page
Peter Tuchman, badge #588: The expressive new york stock exchange trader through the years. Dallas News. (2019, August 27). Retrieved October 28, 2022, from https://www.dallasnews.com/business/2018/02/08/peter-tuchman-badge-588-the-expressive-new-york-stock-exchange-trader-through-the-years/
Robb, G. (2022, October 24). Flash PMI data show U.S. economic downturn 'gathering significant momentum' in October, says S&P Global. MarketWatch. Retrieved October 28, 2022, from https://www.marketwatch.com/story/flash-pmi-data-show-u-s-economic-downturn-gathering-significant-momentum-in-october-says-s-p-global-11666621050?mod=economic-report
Swaminathan, A. (2022, October 26). U.S. new home sales retreat in September, partially reversing surprising gain in prior month. MarketWatch. Retrieved October 28, 2022, from https://www.marketwatch.com/story/u-s-new-home-sales-retreat-in-september-partially-reversing-surprising-gain-in-prior-month-11666794303?mod=economic-report
Swaminathan, A. (2022, October 27). U.S. jobless claims tick up in latest week. MarketWatch. Retrieved October 28, 2022, from https://www.marketwatch.com/story/u-s-jobless-claims-tick-up-in-latest-week-11666874248?mod=economic-report
Persson, Anders S., and John V. Miller. “Weekly Fixed Income Commentary: 10/24/2022.” Nuveen, Nuveen, 24 Oct. 2022, https://www.nuveen.com/en-us/insights/investment-outlook/fixed-income-weekly-commentary.
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