Week 43 in brief
A Friday rally on Wall Street stocks sent all major US indices higher, ending the session up about 2.5% or more and ending in weekly gains. The moves were majorly fuelled by encouraging economic data and a sunnier earnings outlook fueled investor risk appetite ahead of next week’s much-anticipated two-day policy meeting of the Federal Reserve.
This marked the second week in gains for the S&P and the Nasdaq while the blue-chip Dow posted its fourth consecutive weekly advance and its biggest weekly percentage gain since May.
Apple Inc underwent a 7.6% rebound from the recent drop as amazon plunged 6.8% following both companies releasing their earnings report
How did the major indices perform? On Friday:
- The Dow Jones Industrial Average rose 828.52 points, or 2.59%, to 32,861.8,
- The S&P 500 gained 93.76 points, or 2.46%, to 3,901.06
- The Nasdaq Composite added 309.78 points, or 2.87%, to 11,102.45.
For the week:
- The S&P 500 gained 3.9%
- The Nasdaq Composite advanced 2.2%
- The Dow Jones Industrial Average rose 5.7%
What drove the U.S. market?
- Being yet another busy week for earnings, solid reports from energy companies Chevron and Exxon Mobil among other companies outside the tech and tech-adjacent mega-cap group have brought new hope into the market with earnings outlook among analysts improving.
- Analysts expect third-quarter S&P 500 earnings growth of 4.1%, up from 2.5% on Thursday.
- Third-quarter earnings reporting season is halfway done, with 263 companies in the S&P 500 having reported as of this week. Of those, 73% have beaten consensus expectations.
- In terms of economic data, the Commerce Department released data that showed robust consumer spending while the Labor Department showed easing wage growth; indicators that are poised to influence the fed on softening aggressive hikes in interest rates.
- Intel Corp jumped 10.7% after cutting its spending forecast, while T-Mobile US Inc’s subscriber forecast hike sent its shares up 7.4%.
- Twitter Inc was delisted from the New York Stock Exchange, closing the book on Tesla Inc chief Elon Musk’s $44 billion purchase of the company.
How did the European markets perform?
- Positive stock movements on Wall Street inspired stocks in Europe higher on Friday with the pan-European Stoxx 600 index rising 0.14% to 410.76.
- The French CAC 40 index increased 0.46% to 6,273.05, the German DAX gained 0.24% to 13,243.33 and the FTSE 100 index fell 0.37% to 7,047.67.
- The largest individual company growth was by STOXX 600’s oil & gas company OMV AG, as shares of the company increased by 9.3% on Friday. Other companies that recorded major gains included biotechnology firm arGEN-X SE and industrial/office reits company alstria office REIT-AG, which gained 7.4% and 6.2%, respectively. Danske Bank A/S, a banking company, and multiutilities business Centrica PLC rounded out the top five largest increases as their stocks gained 5.8% and 5.1%, respectively.
- The biggest drop was recorded in healthcare with provision company Orpea S.A. seeing the largest drop among Stoxx Europe 600 constituents, as shares cratered 20.4% on Friday.
How did Asian markets perform?
- It wasn’t a good week-ending session for Asian stocks as markets sank on Friday following Chinese cities introducing new COVID-19 curbs, while a broader rout in technology stocks spilled over into Asia after a slew of weak earnings from U.S. heavyweights.
- China’s Shanghai Shenzhen CSI 300 index fell 1.7%, while the Shanghai Composite index shed 1.4% as several cities including Guangzhou and Wuhan introduced new measures to battle a rise in COVID cases. Hong Kong’s Hang Seng index was the worst performer among its peers this week, down over 3% on Friday to a near 14-year low.
- Technology majors including Alibaba Group, Baidu Inc, Tencent Holdings Ltd, and JD.com Inc were hit hard by their exposure to U.S. markets.
- The Taiwan Weighted index dropped 1.5%, while South Korea’s KOSPI fell 0.8%. The KOSPI was among the best performers this week, rising nearly 3% as dismal third-quarter GDP data spurred expectations that the Bank of Korea will soften its pace of interest rate hikes.
- India’s Nifty 50 index rose 0.2%, supported by gains in major energy and consumer stocks. India’s economic growth prospects, which are forecast to be far higher than most major economies this year, have largely buoyed Indian stocks this month.
Bonds and Commodities
- On Friday, Brent crude futures fell $1.19, or 1.2%, to settle at $95.77 a barrel, and U.S. crude fell $1.18, or 1.3%, to $87.90.
- Gold futures fell 1.25% to settle at $1,644.80 per ounce. Spot gold prices dropped 1.17% and spot silver fell 1.91%.
- The yield spread on three-month bills and 10-year notes was -7.5 basis points, showing it had inverted with yields of shorter-dated securities higher than longer ones.
- The spread this week closed negative for the first time since March 2020, indicating a recession lies ahead.
- The yield on 10-year notes rose 7.5 basis points to 4.014%, while the 30-year yield was up 4.3 basis points to 4.137%.
- The two-year yield, which typically moves in step with interest rate expectations, was up 9.5 basis points at 4.416%.
- The breakeven rate on five-year U.S. Treasury Inflation-Protected Securities (TIPS) was last at 2.632%.
- The 10-year TIPS breakeven rate was last at 2.497%, indicating the market sees inflation averaging about 2.5% a year for the next decade.
- The yield on the 10-year German Bund rose 0.11 percentage points to 2.1%.
- The U.S. dollar rose against a basket of other major currencies. The dollar index rose 0.4% on Friday for the second session away from five-week lows at 109.53 against major rivals. This left the euro below parity again, although the sterling gained.
- The stronger dollar pressured dollar-traded commodities, making them more expensive to holders of other currencies.
- The yen was up 0.85% against the dollar. This was after it had weakened earlier following the Bank of Japan announcing it didn’t plan to raise interest rates despite rising inflation.
Next week will be an eventful one for financial markets, with earnings reports expected from several prominent companies including Stryker, Aflac, Pfizer, Moderna, Toyota, Honda, Qualcomm, PayPal, Starbucks, and Kellogg’s, among others. Policymakers at the U.S. Federal Reserve will gather for the two-day November policy meeting of the Federal Open Market Committee (FOMC) beginning Tuesday, with a key interest rate decision expected on Wednesday.
The U.S. labor market will also be in the spotlight, as several key reports, including the Bureau of Labor Statistics (BLS) October nonfarm payrolls report, will be released. The Institute for Supply Management (ISM) will release the latest PMI figures for the U.S. manufacturing and service sectors.