Week 39 in brief
North America
Stocks on Wall Street closed lower on Friday, ending the third consecutive week in losses. Friday also concluded the third successive quarter in losses for wall street stocks, the longest losing streak for the S&P and the Nasdaq since the Great Recession, and the Dow’s longest in seven years.
The US dollar also flirted with its 20-year highs in the week, further adding pain to stocks’ performance. Rampant inflation has been a key factor in this year’s dismal performance in stocks and a closely-watched measure of US inflation released Friday showing the annual pace of price increases slowing down slightly in August compared with the prior month was highly welcomed. It was however not enough to push stocks to positive territory.
How did the major US indices perform
On Friday:
- S&P 500 finished at 3,585.62, down 1.5 percent for the day
- The Dow Jones Industrial Average shed 1.7 percent to close at 28,725.51
- Nasdaq Composite Index dropped 1.5 percent to 10,575.61.
For the week:
- Dow gave up 2.9%.
- The S&P 500 shed 2.9%
- The Nasdaq lost 2.7%
What drove the US market
- The fed’s relentless series of interest rate hikes in decades continues to affect stock movement as investors fear the fed’s actions will push the economy over the edge and into recession.
- The personal consumption expenditures (PCE) report released in the week by the Commerce Department did little to calm investor’s fear of a recession as it showed that while consumers continue to spend, the prices they are paying have accelerated, drifting further beyond the Fed’s inflation target and all but ensuring the central bank’s hawkish monetary policy will continue longer than investors had hoped.
- Two major US companies, Nike Inc and cruise operator Carnival Corp, cited inflation-related margin pressures as they sent dire warnings of a margin squeeze from widespread markdowns. Shares of the companies tanked by 12.8% and 23.3%, respectively.
- The only sector in the S&P 500 to end the week in gains was real estate. Utilities and tech were the biggest losers. Companies that weighed in on the index were Apple Inc, Microsoft Corp, Amazon.com, and Nike.
- The S&P 500 posted no new 52-week highs and 93 new lows; the Nasdaq Composite recorded 27 new highs and 380 new lows.
How did the European markets perform?
- Stocks in Europe were higher on Friday but still ended with weekly losses.
- On Friday, the pan-European STOXX 600 went up 1.3% to 387.85 points, while UK’s FTSE 100 index rose 0.18% to 6,893.81 points.
- Germany’s DAX 30 index increased 1.16% to 12,114.36 points, and France’s CAC 40 index went up 1.51% to reach 5,762.34.
- Italy’s FTSE MIB 30 index went up 1.45% to 20,648.85 points.
- A concerning issue for European investors was the Eurozone inflation, which hit double digits in September, reaching a fresh record of 10%, official data revealed on Friday. The figure climbed from 9.1% in August and 3.4% in September 2021.
- French inflation unexpectedly slowed in September, as consumer prices in the euro area’s second-largest economy advanced 6.2% from a year ago in September, down from 6.6% in August.
- Stock markets have struggled this quarter, with the benchmark STOXX 600 down around 5% for the July-September period, set to notch its third straight quarterly decline in what will be its longest such losing streak since 2011.
How did Asian markets perform?
- Stocks in Asia tracked Wall Street lower as German inflation spiked higher. British Prime Minister Liz Truss defended a tax-cut plan that rattled investors and Chinese factory activity weakened.
- The Shanghai Composite Index lost 0.2% to 3,034.84 after surveys of manufacturers showed factory production, new export orders and manufacturing employment declined in September.
- The Nikkei 225 in Tokyo fell 2.3% to 25,835.54 and the Hang Seng in Hong Kong declined less than 0.1% to 17,154.48. The Kospi in Seoul lost 0.3% to 2,164.63.
- Sydney’s S&P ASX 200 sank 1.2% to 6,479.00 while India’s Sensex opened up 0.3% at 56,596.99. New Zealand and Southeast Asian markets declined.
Bonds and Commodities
- In an aim to control the tanking value of the British pound, The Bank of England said it bought 1.195 billion pounds ($1.33 billion) of long-dated government bonds on Friday at a daily operation designed to calm markets, down from 1.415 billion pounds on Thursday and well below its 5 billion pound maximum.
- In the USA, the yield on the 2-year note rose to finish the week at 4.212%.
- The 10-year yield rose to 3.695%.
- Oil prices fell. Global benchmark Brent crude fell 4.8% Friday to $86.15 a barrel. WTI, its U.S. counterpart, was down 5.7% Friday to finish the week at $78.74 a barrel, its lowest settle value since January.
Currencies
- The Sterling, which had been performing dismally in recent weeks, managed to hold gains after clawing back more of the huge losses suffered at the start of the week owing to a tax-cutting mini-budget that analysts warned could cause even more pain to the already fragile UK economy.
- The Bank of England pledged $71 billion of support to shattered financial markets, leading to the pound’s bounce from a record low of $1.0350 Monday to above $1.11 Friday.
- Also on Friday, the euro was down 0.10 percent at $0.98055.
- The dollar index, which measures the greenback against a basket of major currencies, was down 0.08 percent on the day but on track for a quarterly gain of 7.2 percent.
- The US dollar was up 1.04 percent against the Canadian dollar while New Zealand’s kiwi was down 2.24 percent and the Australian dollar was down 1.62.
Next week
The U.S. labor market could take the spotlight next week, with the release of the Labor Department’s nonfarm payrolls report for September, its August Job Openings and Labor Turnover Survey (JOLTS), and ADP’s private-sector payrolls report. The reports could show how well the labor market has held up against the Fed’s more hawkish monetary policy moves.
Purchasing Managers’ Index (PMI) survey readings from S&P Global and the Institute for Supply Management (ISM) will offer updates on the recent performance of the U.S. manufacturing sector.
As earnings season approaches, we can also expect key earnings reports from denim maker Levi Strauss and beverage giant Constellation Brands.