Week 43 in Brief
- U.S. stocks ended October at an all-time high, booking weekly and monthly gains, despite disappointing big tech earnings from Amazon and Apple.
- The S&P 500 and Nasdaq Composite indexes each saw their biggest monthly gains since November 2020.
How did the major indices perform?
- The Dow Jones Industrial Average rose 89.08 points, or 0.3%, to close at a record 35,819.56.
- The S&P 500 index advanced 8.96 points, or 0.2%, to finish at an all-time high of 4,605.38.
- The Nasdaq Composite gained 50.27 points, or 0.3%, to end at a new peak of 15,498.39.
- For the week, the Dow gained 0.4%, the S&P 500 rose 1.3% weekly and the Nasdaq Composite advanced 2.7%. For October, the Dow climbed 5.8%, while the S&P 500 jumped 6.9% and the Nasdaq gained 7.3%.
- Year-to-date the Dow is up 17.03%., the S&P 500 up 22.61 %, and the Nasdaq up 20.25%.
What drove the US market?
- Big Tech earnings: U.S. stocks saw a strong finish to October, shrugging off disappointing third-quarter earnings reports from big technology companies that weighed on Friday’s action. Apple missed revenue expectations for the first time since late 2018, amid slower-than-expected sales of iPhones and wearables. Microsoft overtook Apple as the most valuable U.S. company after the smartphone giant reported a rare sales miss in the face of supply constraints.
- Meanwhile, Amazon.com reported an earnings drop of nearly 50% and provided a disappointing holiday shopping forecast as it struggles with supply-chain and staffing issues. Amazon and Apple shares were both down more than 2% in early afternoon trading Friday.
- Federal Reserve Policy: Traders have been factoring in expectations for tighter Federal Reserve monetary policy as debt yield curves flatten across the globe. Many expect the Fed will announce a plan next week for tapering its $120 billion in monthly bond purchases. Markets also brushed aside European Central Bank President Christine Lagarde’s attempt on Thursday to push back against rising market expectations for policy interest rate increases by the end of next year.
- Economic Data: Personal income slumped 1% in September after a 0.2% gain in the prior month, while consumer spending rose 0.6%. Economists were looking for a 0.4% decline in personal income and spending came in line with expectations.
- Meanwhile, the University of Michigan’s gauge of consumer sentiment rebounded slightly to a final October reading of 71.7, up 0.3 points from the preliminary reading earlier this month, but below the final September level of 72.8.
Which US stocks were in focus Friday?
- Shares of Chevron rose 1.2% after the energy giant reported third-quarter profit and revenue that soundly beat forecasts, on surging crude oil and natural gas prices.
- Western Digital Corp. was in focus after disappointing profit guidance from the disk-drive and flash memory chip group. Shares fell 8.7%.
- Starbucks Corp. stock slid 6.3% after the coffee giant’s fourth-quarter sales growth slowed, falling short of the company and Wall Street’s expectations.
- Shares of Meta Materials Inc., a Nova Scotia-based material-science company, rose about 3.1%, after a 5% gain during Thursday’s session following Facebook Inc.’s announcement that it was changing its name to Meta.
- Zendesk Inc. shares dropped 14.5% after the customer-service platform said it would buy Momentive Global Inc., the parent company of online questionnaire platform SurveyMonkey in a $4.13 billion stock deal. Momentive Global shares slid 8%.
How did the European markets perform?
- European stocks closed mixed on Friday as traders digested a raft of U.S. and domestic corporate earnings.
- The pan-European Stoxx 600 provisionally ended 0.06% higher, with sectors and major bourses pointing in opposite directions. Utility stocks led losses, shedding more than 1%.
- European traders reacted to a busy morning of earnings, with BNP Paribas, Natwest, Glencore, BBVA, and Bank of Ireland just some of those reporting before the bell.
- Inflation in the eurozone rose to 4.1% in October, hitting a 13-year high. This comes after the European Central Bank decided Thursday to keep interest rates and its monetary policy stance unchanged, despite ongoing inflationary pressures. President Christine Lagarde tried to play down the chances of a rate hike for 2022, hinting that market players might be getting ahead of themselves with their predictions. In individual stocks, Volvo Cars made its market debut on Friday, with shares surging 22% upward from their offer price. The company’s listing marks Europe’s biggest IPO this year.
- Biotechnology firm Argenx rose toward the top of the European blue-chip index after reporting strong second-quarter earnings. Shares gained 7.6%.
How did Asian markets perform?
- Asian markets finished mixed as of the most recent closing prices. The Shanghai Composite gained 0.82% and the Nikkei 225 rose 0.25%. The Hang Seng lost 0.70%.
- Chinese developers are struggling with liquidity problems, and proposals to trial a property tax are not helping sentiment even as regulators seek to contain the fallout centered around embattled China Evergrande Group.
Commodities and Bonds
- The yield on the 10-year Treasury note declined two basis points to 1.56%, after seeing its steepest daily drop since July 19 on Wednesday as front-end yields jumped, flattening the curve. Yields and debt prices move in opposite directions.
- Germany’s 10-year yield advanced three basis points to -0.11%
- Britain’s 10-year yield advanced three basis points to 1.03%.
- Oil futures rose Friday, with the U.S. benchmark increasing 0.9% to $83.57 a barrel, but still seeing a weekly decline of 0.2%.
- Gold futures ended lower Friday, slipping 1% to settle at $1,783.90 an ounce for a weekly decline of 0.7%.
- The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, was up 0.8%.
- The Bloomberg Dollar Spot Index rose 0.7%
- The euro fell 1% to $1.1559
- The British pound fell 0.8% to $1.3684
- The Japanese yen fell 0.4% to 113.98 per dollar
- Bitcoin rose to $62,300 and Ether rallied to a record high.
- The earnings season will continue with a focus on major energy companies, including Marathon Oil, ConocoPhillips, and Diamondback Energy.
- Ride-hailing companies Lyft & Uber also report.
- Fed officials will discuss tapering and interest rates at the two-day FOMC meeting starting Tuesday.