Week 44 in brief
Stocks on Wall Street ended higher on Friday after breaking a four-day losing streak. The gains were insufficient to offset losses from the first four days of the week as all the major US indices ended in weekly losses.
Friday’s volatile trade was a result of a mixed jobs report and comments from Federal Reserve officials on the pace of interest rate hikes. The labor market report showed an uptick in the unemployment rate in October, indicating some signs of slack may finally be starting to emerge in the job market and give the Fed room to downsize its rate hikes beginning in December. The data also showed the average hourly earnings rose slightly more than expected, as did job growth, pointing to a labor market that largely remains on a firm footing.
How did the major indices perform?
- The Dow Jones Industrial Average rose 1.26% to 32,403.22,
- The S&P 500 gained 1.36% to 3,770.55 and,
- The Nasdaq Composite added 1.28% to 10,475.25.
For the week:
- The Dow fell 1.39% to snap a four-week winning streak,
- The S&P dropped 3.34% and,
- The Nasdaq slid 5.65% for its biggest weekly percentage decline since January.
What drove the U.S. market?
- October’s nonfarm payrolls report on Friday left investors divided, fueling some concern that the Fed will persist with its hiking campaign since the labor market added 261,000 jobs. Others interpreted the findings as a sign that the labor market is beginning to cool, albeit at a slow pace, since the unemployment rate rose to 3.7%. Traders’ expectations of a 75 basis point rate hike in December had briefly jumped after the jobs report but were now pricing in about a 62% chance of a 50 basis point hike,
- Meanwhile, hopes of an easing in China’s tough COVID-19 curbs supported some areas of the market, with U.S.-listed shares of Chinese companies including Alibaba, which finished up 7.05%, and JD.com, up 9.74% among the winners.
- Market focus will now turn to a key consumer inflation reading due next week as well as the U.S. midterm elections on Nov. 8, where control of Congress is at stake.
- Starbucks Corp jumped 8.48% after it topped Wall Street estimates for quarterly comparable sales and profit, while DoorDash Inc’s (DASH.N) revenue beat boosted the food delivery firm’s shares by 8.32%.
- Volume on U.S. exchanges was 13.31 billion shares, compared with the 11.74 billion average for the full session over the last 20 trading days.
- Advancing issues outnumbered declining ones on the NYSE by a 2.56-to-1 ratio; on Nasdaq, a 1.41-to-1 ratio favored advancers. The S&P 500 posted 18 new 52-week highs and 27 new lows; the Nasdaq Composite recorded 81 new highs and 278 new lows.
How did the European markets perform?
- Stocks in Europe also rallied on Friday with the Pan-European STOXX 600 closing 1.8% higher, with basic resources, personal & household goods, and automakers leading a broad rally. This was after the U.S. jobs data backed bets the Federal Reserve would deliver smaller rate hikes, with hopes of easing COVID-19 curbs in China boosting mining and luxury stocks.
- Luxury giants including LVMH, Kering, Pernod Ricard, and Hermes International, which have a large exposure to China, climbed between 3.7% and 7.1%.
- Miners rose 5.3% to post their best day in almost four months as metal prices jumped on speculation over easing COVID-19 curbs in top metal consumer China.
- Adidas shot up 21.4% to the top of the STOXX 600 after Germany’s manager magazine reported that outgoing Puma chief executive Bjorn Gulden is set to become the new Adidas head.
- Manufacturer Andritz surged 10.7% as its quarterly sales and profit rose significantly.
- Societe Generale jumped 2.6% after posting a higher-than-expected net income, while shares in Monte dei Paschi di Siena plunged 12.0% after the bank completed a 2.5-billion-euro ($2.4 billion) capital raise.
- The final eurozone PMI (purchasing managers’ index) reading for October on Friday signaled a deepening downturn as inflation and fears of an energy crisis compressed demand across the bloc.
How did Asian markets perform?
- Asian stocks tracked Wall Street and Europe higher with hopes that the Chinese government would ease its Covid curbs and also reverse its Zero Covid strategy.
- Hang Seng led the gains with a more than 5 percent surge. The Hang Seng Index of the Hong Kong Stock Exchange surged 822 points or 5.36 percent from the previous close to finish trading at 16,161.14. The day’s trading range was between a high of 16,510.58 and a low of 15,339.49.
- China’s Shanghai Composite Index rallied 73 points or 2.43 percent to finish at 3,070.80. The day’s trading ranged between 2997.00 and 3,081.59. The Shenzhen Component Index added 347 points or 3.20 percent to close at 11,187.43.
- Japanese benchmarks however dropped as Thursday’s market holiday delayed the Fed-fueled decline. The Japanese benchmark Nikkei 225 erased 464 points or 1.68 percent to end trading at 27,199.74. The day’s trading range was between 27,032.02 and 27,389.30.
- Mitsubishi Motors Corp was the biggest gainer with an 18 percent uptick. Konica Minolta added 8.9 percent. Mitsubishi Heavy Industries and Sumitomo Corp gained more than 4 percent.
- Z Holdings Corp declined 14 percent. AGC dropped 9.3 percent, closely followed by Nippon Suisan Kaisha which dropped 8.6 percent. Nippon Sheet Glass Co and Yamaha Corp lost more than 5 percent each.
- Korean Stock Exchange’s Kospi Index added 19 points or 0.83 percent to close trading at 2,348.43. The day’s trading range was between 2,316.29 and 2,348.43.
- Australia’s S&P/ASX200 closed trading at 6,892.50 after adding 35 points or 0.50 percent. The day’s trading was between 6,829.60 and 6,895.00.
- The NZX 50 of the New Zealand Stock Exchange added 46 points or 0.41 percent to close at 11,230.75. Trading ranged between 11,129.62 and 11,251.27.
Bonds and Commodities
- The yield on the two-year Treasury, which is particularly sensitive to short-term monetary policy expectations, declined from its Thursday peak when it reached its highest level since mid-2007. The yield on the note fell 0.04 percentage points to 4.66 percent on Friday.
- Benchmark U.S. 10-year Treasury yields rose, with the notes at 4.1626%.
- Gold jumped more than 2% as the dollar fell. Spot gold added 3.1% to $1,680.33 an ounce, while U.S. gold futures gained 2.90% to $1,672.50 an ounce.
- Oil prices rose by 5% amid the looming European Union ban on Russian oil and as investors weighed the implications of China’s easing of COVID restrictions.
- Brent crude futures settled up 5% at $98.57 a barrel, while U.S. West Texas Intermediate (WTI) crude futures rose 4.98% to $92.56 per barrel.
- Industrial metal prices skyrocketed on the news. Copper, a barometer of health for the global economy, powered 8 percent higher to breach $8,000 a tonne for the first time in two months. Other base metals nickel, zinc, and tin also jumped up by more than 5 percent after sliding lower since March on macroeconomic fears that have trumped supply concerns. Gold gained 2.1 percent to $1,676.60 per troy ounce.
- The US dollar index, which tracks the currency against six peers, fell 1.9 percent on Friday while the euro was up 2.1% to $0.9956.
- The dollar fell 1.1% against the yen to 146.65 yen, posting losses for a third straight week.
- Speculators reduced their net long bets on the U.S. dollar to $3.08 billion for the week ended Nov. 1, compared with a net long position of $10.21 billion last week.
With roughly 80% of S&P 500 companies having reported their earnings so far, investors can expect a more subdued pace of earnings releases next week. Some large companies scheduled to report include The Walt Disney Company, AstraZeneca, BioNTech, Activision Blizzard, DuPont, and Norwegian Cruise Line, among others.
The October CPI inflation report on Thursday could offer clues on the recent trajectory of consumer prices and how it could impact the Federal Reserve’s monetary policy agenda.
On Friday, the University of Michigan will release its preliminary Consumer Sentiment Index (MCSI) for November, providing a key update on consumer confidence. Market watchers can also expect economic updates from the U.K., as the Office for National Statistics will release preliminary GDP figures for the third quarter.