Market Synopsis: Equities down, Treasuries up, Commodities up, Dollar flat, Crypto up
Past Week Events:
- Jerome Powell, who is an important figure in the Federal Reserve, hosted a press conference where he gave a statement and answered questions regarding raising interest rates to cool down inflation. Recent efforts by the Federal Reserve to calm inflation have been largely ineffective. Markets tumbled after the press conference as Powell made it clear that high interest rates aren’t going anywhere by saying, “...pausing is not something we're thinking about…”. This scared markets as Powel is indicating the Federal Reserve will continue to tighten monetary policy.
- Jobless claims or unemployment claims measure those who are requesting unemployment benefits and those who are unemployed and continuing to receive benefits. Jobless claims came slightly under expectations at 217,000. This is still low historically speaking which continues to concern the Federal Reserve and investors as inflation is still climbing. This being a relatively low number means the labor market is doing well. This is what the Federal Reserve wants to hear because their aim is to lower inflation which means that labor markets need to slow down.
- 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. The unemployment rate rose to 3.7% which is the highest since February. This spooked stocks as it could indicate a wider economic slow down.
Next Week (October 31):
- NFIB Small Business Optimism Index will be released which allows small business owners to obtain a perspective on how small businesses are doing on an overall trend. Inflation being at a high has impacted small business in a negative way, so business will be on guard for this month's report.
- 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.
- Consumer Price Index will be released which displays the change in price of products and services. This report is very important for investors because it will show how the attempts of the federal reserve to lessen inflation are doing. Investors and the Fed are hoping it will cool off regarding rates being raised to mitigate inflation.
Market Snapshot:
- Markets had a busy and rough week. Rumors that China may ease its “Zero-COVID” strategy sparked some hope for markets as the world could potentially see a relaxation of the strain placed on companies relying on China. However, the labor market report is where the market’s turbulence began. The amount of people employed or “payrolls” beat expectations, wage growth slowed showing inflation might be slowing, and the number of unemployed Americans is the highest since February. Furthermore, Jerome Powell, the chair of the Federal Reserve, gave a press conference that spooked markets with his “Hawkish” tone meaning that high interest rates aren’t going anywhere anytime soon. These factors worked together to push markets lower.
U.S Equities:
Indexes(Week)
SPX 3,770.55(-3.35%), DJIA 32,403.22(-1.40%),
NASDAQ 10,475.25(-5.65%), RUT 1,799.87(-2.55%)
Sectors
- There was somewhat of a mixed bag in sectors this week with Technology tumbling midweek ultimately closing the week down about 7 percent. Growth stocks underperformed value stocks this week. So it is no surprise technology tumbled. Energy, on the other hand, outperformed all other sectors rising about 2 percent.
Individual Stock to Note
- Earnings in large part were responded with panic selling. One notable stock is Roku which tumbled around 20 percent after providing a not so optimistic earnings forecast. Roku is expecting its advertising and sales of streaming hardware revenue to decline in the next quarter. This bad news prompted investors to panic sell the stock. Roku is blaming the broader macroeconomic environment which will reduce spending on part of advertisers.
- This has been a big week for fixed income, for the federal reserve hiked its policy rates by another 0.75% (75 bps). In the past 8 months, the federal reserve has raised a cumulative 375 bps, and the rate has now reached 4% which is a high since 2007.
- Sadly for investors, with increasingly higher rates a recession is more and more likely to occur meaning the stock market will take a hit, so fixed income is something investors may need to look more closely into. Short-term yields are on a rise, and investors are making 9$ for every 100%$ in a two-year period. For strong protection against the recession, looking into longer investment bonds can bring 20-30% returns in the next few years if the federal reserve brings back rates down from 4% back to around 2%.
Rate percentage chart since 2007
Commodities:
Oil
- Oil also finished the week about 5 percent in the green. This rise can be attributed to rumors of China potentially relaxing its “Zero COVID” strategy. Prices at the pump are also set to rise as gasoline prices are at three month highs.
Gold
- Gold closed the week out at $1,685.70 hitting three week highs. Interestingly, a massive buyer is responsible for the spike in prices. The buyer purchases 300 tonnes which is equivalent to 42 full grown elephants.
BTC -21,382, 3.55%, ETH - 1,651, 5.81%
Bitcoin chart
- Crypto ended the week strong after Friday's job report, and bitcoin maintained above the 20,000 level this past week showing promising potential for investors.
- Last week it was noted that Binance assisted Elon Musk in buying out twitter, and there are now reports regarding Binance possibly obtaining a role in Twitter. Twitter has a massive problem regarding bot accounts, and Binance will be looking to assist Elon Musk’s Twitter in cleaning that mess up.
- Elon Musk continues his buffoonery with DogeCoin, as his tweet from Halloween night caused a rally in DOGE.
Europe:
Stoxx 600- 416.98, 1.51% DAX -13,459, 1.63% FTSE 100 -7,334, 4.07%
- A week regarding big news concerning policy rates to mitigate inflation. England’s central bank decided to raise 75 bps in regard to inflation, and investors are concerned that similar to the U.S the UK is in for an incoming recession.
- Earnings reports on Friday left investors on a good note, as SocGen reported net income half a billion dollars above its projection, pretty good. Stoxx 600 is up 1.51% on the week.
Bank of England
Asia:
XJO (Australia)-6,892, 1.57% Shanghai 180 Index-7,938, 5.59% Nikkei 225- 27,370, -0.44%
- Highlighted by the rally in Shanghai’s index, the economy is upbeat following the recent news that the government will start to ease pandemic policies. Although there has been no official policy enacted yet, just the idea excited everyone. Shanghai 180 index ended up 5.59% on the week.
Sources Cited
Bartash, Jeffry. “U.S. Job Creation Slowed to 261,000 --- But It’s Still Too Strong For The Fed.” MarketWatch, www.marketwatch.com/story/coming-up-u-s-jobs-report-for-october-11667563268. Accessed 4 Nov. 2022.Bartash, Jeffry. “U.S. Jobless Claims Dip to 217,000 And Stay Near Pandemic Lows.” MarketWatch, www.marketwatch.com/story/jobless-dip-to-217-000-and-stay-near-pandemic-lows-11667479161. Accessed 4 Nov. 2022.Haggin, Patience. “Roku Shares Tumble as Streaming-Device Giant Warns of Tough Holiday Season.” WSJ, www.wsj.com/articles/roku-q3-earnings-report-2022-11667430844. Accessed 4 Nov. 2022.Durdeb, Tyler. “Gold Market Roiled as Mystery Buyer Waves in 300 Tonnes | ZeroHedge.” Gold Market Roiled as Mystery Buyer Waves in 300 Tonnes | ZeroHedge, www.zerohedge.com/commodities/gold-market-roiled-mystery-buyer-waves-300-tonnes. Accessed 4 Nov. 2022.
https://www.cnbc.com/2022/11/04/europe-markets-open-to-close-after-big-week-for-earnings-and-monetary-policy.html
https://www.reuters.com/world/china/
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