Market Synopsis: Stocks Higher, Treasury Yields Lower, Commodities Lower, Dollar Lower, Crypto Higher
Past Week Events:
This Week's Events:
On November 1st, the Federal Reserve decided to keep interest rates steady, maintaining them in the 5.25%-5.50% range. This decision came as the Fed continues to assess the right balance between controlling inflation and supporting the economy. Fed Chair Jerome Powell highlighted the challenges of determining if the current financial conditions are sufficient to manage inflation, which remains above their 2% target. In recent data, inflation stood at 3.4%, and when removing the fluctuating costs of food and energy, it was 3.7%. Powell also noted the influence of rising market rates, such as Treasury bond yields and home mortgage rates, on the economy. Following this announcement, U.S. stocks rose, and there are growing expectations that the Fed may not raise rates soon and might even consider cutting them.
In October, the US added 150,000 jobs, fewer than the anticipated 180,000, with the unemployment rate rising slightly to 3.9% due to auto industry strikes. Although these strikes impacted the job numbers, a deal has been reached to end them. Meanwhile, wage growth was slightly below expectations, increasing by 0.2% for the month and 4.1% for the year. Notably, the healthcare sector added 58,000 jobs. Market insights suggest that based on recent comments from Federal Reserve Chair Jerome Powell, interest rates might remain unchanged in the near future.
Next Week:
An array of Federal Reserve members, including the governors and chairmen Powell and his vice chairmen, will speak throughout the week. Per usual, they will be discussing current economic trends and how the Federal Reserve plans to tackle them in the future. These meetings typically have vast effects on the market depending on how investors respond to them and what the members say about possible changes in their monetary policy.
Besides these meetings, the week is underwhelming in critical economic reports. The week ends with Veterans Day. WeeklyTheta salutes all the veterans, particularly those who dabble in the market!
Market Snapshot:
This past week was remarkable for financial markets, with both stocks and bonds experiencing a significant rally. In fact, it's been the best performance for these assets this year, while the dollar took a downturn, marking its second-worst week. Several factors contributed to these shifts. The U.S. Treasury's decisions led to a decrease in bond yields, positively impacting stocks. Additionally, Jerome Powell, the Federal Reserve Chair, hinted at a less aggressive approach towards future rate hikes, which was welcomed by investors. This sentiment was further fueled by weaker global economic data, suggesting central banks might adopt a more cautious strategy. Notably, the small-cap centric Russell 2000 index and stocks that have been heavily shorted by investors saw significant gains. In the bond market, there was a preference for long-term bonds, leading to a change in the yield curve. The U.S. dollar's decline was its most significant since a Federal Reserve meeting in September. In the crypto space, Bitcoin experienced minor fluctuations but seemed to stabilize around $34,500. Oil prices took a dip due to reduced geopolitical tensions, and gold, while maintaining its position above $2000, seemed to underperform considering the dollar's decline.
Quip of the Week:"The time to buy is when there's blood in the streets."
Jim Rogers
U.S Equities:
Indexes(Week)
SPX 4,358.34(5.85%), DJIA 34,061.32(5.07%),
NASDAQ 13,478.28(6.61%), RUT 1,760.70(7.56%)
Sectors:
The stock market had its best week of the year, with all stocks ending in the positive range, with the lowest-performing sector, gold, ending approximately 2.4% up. This jubilant week can be primarily attributed to Fed Chairman Powell hinting at a more dovish monetary policy approach in the near future, considering poor economic data globally. Oil, still ending positive, ended at the bottom of the barrel due to geopolitical tensions alleviating.
Treasuries:
Benchmark 10-year U.S. Treasury yields fell to a five-week low after October job growth data showed a slower increase than expected. Nonfarm payrolls rose by 150,000 jobs, missing the predicted 180,000. As a result, expectations of a Federal Reserve rate hike in December have significantly decreased, with current odds at just 5%. Strikes by the United Auto Workers union played a role in the job numbers, but other factors were also at play. Both 30-year and two-year yields also dropped. This week's decline in Treasury yields was influenced by the Treasury's revised refinancing estimates, reduced debt auction increases, and cautious remarks from Federal Reserve Chairman Jerome Powell. Upcoming Treasury debt auctions will be the next focus for market watchers.
Commodities:
Oil
Oil prices dropped over 2% on Friday, with Brent crude at $84.89 a barrel and U.S. West Texas Intermediate at $80.51, influenced by reduced Middle East supply concerns and U.S. job growth data suggesting the Federal Reserve might halt further interest rate increases. Hezbollah leader Sayyed Hassan Nasrallah's warnings about potential Middle East conflicts didn't significantly disrupt the oil market. Additionally, while the U.S. House of Representatives passed a bill for stronger sanctions on Iranian oil, its effectiveness remains uncertain. Meanwhile, U.S. energy companies have minimized operational oil and gas rigs to their lowest since February 2022.
Gold
Considering the market had its best week of the year, and the dollar performed poorly, gold had a surprisingly underwhelming week ending approximately -0.68% down. This may be attributed to alleviating geopolitical tensions in the Middle East, where gold sought its glory amidst the war for its attractive safe-haven type characteristic.
Crypto:
BTC -35,101, 1.28% ETH - 1,893, 4.31%
BTC Graph (5-day)
The conviction of Sam Bankman-Fried on fraud charges is seen as a mixed bag for the crypto industry. While it's a setback, showcasing the sector's vulnerability to bad actors, it also displays accountability within the crypto space. Some experts believe this may restore faith, ensuring a fair playing field for honest operators and showing that the law can handle fraud, even in complex crypto cases. However, there's concern about the lasting reputational damage and the harsh spotlight on the industry, potentially slowing down regulatory progress and mainstream acceptance.
Europe:
Stoxx 600- 444.24, 3.41% DAX- 15,189, 3.42% FTSE 100 -7,417, 1.73%
DAX Chart (5-day)
This week demonstrated the largest weekly gain since 2008 for European real estate stocks. This surge is attributed to a rally in government bonds which has reduced yields both in Europe and globally. Specifically, the rate-sensitive real estate index increased by 12.7% over the week, with a notable 3.2% rise on a particular day. Additionally, the broader STOXX 600 index also saw an improvement, with a 0.5% increase on the day and a total of 3.7% over the week due to five consecutive days of gains1.
Asia:
XJO (Australia)-6,978, 2.22% Shanghai 180 Index-7,748, 0.49% Nikkei 225- 31,949, 4.41%
XJO Chart (5-day)
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