In Markets "In a Nutshell"

Markets “In a Nutshell” for October 10, 2022

Investment Week at a Glance

Stocks finished higher for the week.  The Dow Jones Industrial Average rose 2.00%, the S&P 500 was up 1.50%, and the NASDAQ rose 0.70%. Foreign stocks (MSCI EAFE) were also up, rising 3.40%.  Bond prices were down for the week, with the 10-year U.S. Treasury ending the week at 3.89%.  (Data source: Wall Street Journal)

Volatility Continues to Shake Markets

At the end of September, markets were once again at new lows for the year, ending the quarter on a bad note. The start of the 4th quarter was different however with the S&P 500 having its biggest 2-day rise since April of 2020. Some of these gains were given up on Friday after another solid jobs report was released as unemployment fell to 3.5 while the economy added 263,000 jobs. Although these types of job reports typically help the market, we are in different conditions with inflation worries. Investors see this strong jobs report as another reason for the Fed to have to slow down in raising rates because we still have a labor shortage which causes inflation to continue. While this report does not help in terms of the Fed slowing rate hikes, it does show the US job market has been resilient as of now.

Fed Outlook

The main drag on markets this year has been due to rates spiking throughout the year as the Fed rapidly raises rates to try and get inflation under control. Although the most recent jobs report may cause the Fed to continue to raise rates, there is some data that could lead to the Fed stopping rate hikes. This was the lowest monthly increase in jobs since April 2021 and the number of job openings decreased by 10% which was the most since April 2020. This was also the 4th decline in the last 5 months of job openings. As this gap continues to close, wage growth will also slow down as the demand for labor decreases and the supply increases as people need to get back to work as costs continue to rise. Another number the market and Fed will pay close attention to this upcoming week is the CPI data which is set to be released this week. This is also the last CPI data we will get before the midterm elections in November which could also affect the market.



What is the current estimated EPS (earnings per share) growth for stocks for next year? (Scroll Down for Answer)

  1.     -1.2%
  2.     9%
  3.     2%
  4.     7%



























Answer below.



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4)    7.7%.  Although recession worries continue to persist, the current growth of earnings estimates for 2023 are just below the 20-year average of 7.8%. However these estimates have come down since the beginning of the year where they were at 9.6% growth. Although many different factors affect the market if earnings hold up, it will be hard for the market to continue to fall.