Markets “In a Nutshell” for November 6, 2023
Investment Week at a Glance
Stocks finished higher for the week. The Dow Jones Industrial Average rose 5.07%, the S&P 500 was up 5.88%, and the NASDAQ rose 6.62%. Foreign stocks (MSCI EAFE) were also up, rising 4.41%. Bond prices were up for the week, with the 10-year U.S. Treasury ending the week at 4.56%. (Data source: Morningstar)
Global Equities Rally
The past week witnessed the most robust surge in US stock markets in a year, driven by the bond market’s consensus that the United States has likely reached the highest interest rates of this economic cycle. Within the US Treasury market, notable shifts occurred, with the yields on the US 10-year and 30-year Treasuries decreasing by approximately 0.25%. As we move into this week, there will be fewer data releases, in line with the customary trend after the initial week of the month, which typically features the US employment report. However, earnings season remains in focus.
The Federal Reserve is currently adopting a “wait-and-see” approach regarding its ongoing rate hike cycle. They are closely monitoring the cumulative impact of higher interest rates on the economy, along with incoming data. Therefore, it’s crucial to closely monitor the data releases and their influence on bond yields, as this will significantly affect movements in the equity markets. For instance, the Fed’s consistent message of “higher-for-longer” rates, which is justified due to elevated inflation and a strong job market, has been pushing bond yields higher and putting downward pressure on valuations in recent months.
This week, we are expecting a substantial amount of economic data, with a particular focus on employment statistics. The highlights include the October Jobs Report on Friday and the ISM Services report. Employment has shown remarkable resilience this year, as has the consumer and service sectors of the economy. The trends in these areas continue to exert significant influence on economic activity, the Fed’s expectations, bond yields, and movements in the equity markets.
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