Alright, folks, let’s break down this week’s financial whirlwind with some hard numbers and a sprinkle of analysis.
Israel-Hamas Tensions: A Geopolitical Chess Game
The week started with Israel declaring war on Hamas after a surprise attack. The global community watched closely, with concerns of a broader regional conflict. By Friday, tensions escalated as Israel warned 1.1 million residents in the northern Gaza Strip to evacuate within 24 hours, hinting at a potential ground assault. Iran’s foreign minister didn’t help ease tensions, suggesting Israel might face repercussions in “other areas.”
Stock Market: A Game of Highs and Lows
Despite geopolitical concerns, the stock market showed some mettle. There were gains, especially with the dip in Treasury yields and some strategic buying. However, as the weekend neared, the market’s confidence seemed to wobble a bit.
- DJIA (Dow Jones Industrial Average): Started the week at 33,407.50 and ended at 33,670.20, marking a change of 262.70 points, which is an increase of 0.8%.
- Nasdaq: Began the week at 13,431.30 and closed at 13,407.20, a decrease of 24.10 points or -0.2%.
- S&P 500: Opened the week at 4,308.50 and wrapped up at 4,327.78, a rise of 19.28 points or 0.4%.
- Russell 2000: Started at 1,745.56 and settled at 1,719.71, declining by 25.85 points or -1.5%.
Sector Spotlight: The Winners and Losers
Of the S&P 500 sectors, eight experienced gains. Energy was the standout, rocketing by 4.5%. Conversely, the consumer discretionary sector faced a setback, declining by 0.7%.
Other Key Events:
- Economic Indicators: Decoding the Percentages: The Producer Price Index (PPI) and Consumer Price Index (CPI) didn’t bring the cheer investors hoped for. Yet, the 10-yr note seemed to be the week’s favorite, benefiting from safe-haven flows and optimism about future inflation rates. The 2-yr note yield dipped to 5.05%, while the 10-yr note yield experienced a more significant drop to 4.63%.
- Fed Hawkish?: Federal representatives believe that the current stringent monetary policy will remain until inflation stabilizes, as indicated in recent records. “Most members felt that a subsequent hike in the benchmark interest rate would probably be fitting in an upcoming session.”
- Microsoft Hit With $29B Tax Bill: The IRS claims that Microsoft has a pending tax bill of $29B, stemming from profit distributions across nations from 2004 to 2013. Microsoft plans to challenge this through the IRS’ review process, which might extend for several years.
- Mac Sales Down: Recent data from IDC, Gartner, and Canalys reveal that Apple Macbook’s sales dropped by over 23% in the third quarter. While the broader PC market experienced a 7% to 9% dip in shipments, there was a slight uptick compared to the previous quarter.
- UAW Strike: The UAW has initiated intensified strikes at Ford’s Kentucky truck facility. This expanded strike involves 8,700 UAW members and affects the production of Ford pickups, Expeditions, and Lincoln Navigators.
- Earnings Season: The Corporate Scorecard Big names stepped into the earnings spotlight this week. JPMorgan Chase (JPM), Wells Fargo (WFC), Citigroup (C), and UnitedHealth (UNH) all reported, showcasing generally favorable results.
- Capitol Hill Chronicles: A Leadership Quandary The House faced a leadership conundrum this week. Rep. Steve Scalise (R-LA) seemed poised to take the Speaker’s gavel but withdrew after failing to secure enough support. This leadership void adds uncertainty, especially with the budget agreement deadline on November 17 looming large.
This week was a blend of geopolitical events, market movements, and specific economic numbers painting a vivid picture. As we gear up for the next week, the questions remain: How will the geopolitical landscape evolve? What will the market’s next move be? And can the House find its leader? The clock is ticking.
CALENDAR & MOVERS
- Tuesday: Retail Sales (MoM)
- Thursday: Existing Home Sales
- Thursday: Philly Fed Manufacturing
- Fed Talks
- Middle East Tensions
- Tesla Takes the Lead: This week, the spotlight’s on Tesla (TSLA) as it gears up to be the first of the “Magnificent Seven” tech giants to unveil its Q3 results on Wednesday.
- Banking Biggies: Last week, JPMorgan Chase (JPM), Wells Fargo (WFC), and Citigroup (C) showcased robust quarterly profits, thanks to rising rates. This week, we’re all eyes for:
- Bank of America (BAC)
- Goldman Sachs (GS)
- A slew of regional banks
- Consumer Insights: Eager to get a pulse on consumer behavior? Johnson & Johnson (JNJ) and Proctor & Gamble (PG) are set to spill the beans with their earnings reports.
U.S. Economic Pulse
- Retail Rundown: Tuesday’s the day for September’s retail sales data. We’re looking at a projected 0.2% uptick, a tad slower than July’s 0.5% and August’s 0.6%.
- Housing Health: Reports on building permits, housing starts, and the NAHB Housing Market Index are on the horizon, giving us a peek into the housing sector’s vitality.
- Manufacturing Matters: Regional manufacturing activity reports are on the docket, and let’s just say, we’re not expecting fireworks.
Oil’s Roller Coaster Ride
- Middle East Meltdown: The escalating tensions between Israel and certain terrorist groups have got the market on its toes.
- U.S. Sanctions Stir the Pot: The U.S. threw a curveball last Thursday, slapping sanctions on folks moving Russian oil over the G7’s $60/barrel cap. With Russian and Middle Eastern oil dynamics in flux, we’re in for an interesting few weeks.
Global Glimpses & Noteworthy Nods
- China’s Check-in: Come Wednesday, all eyes will be on China’s economic data, especially with the ongoing property sector drama and potential Beijing bailouts.
- U.K. Inflation Intel: Prepping for the Bank of England’s November meeting, September’s inflation stats from the U.K. are eagerly awaited.
- Fed Chats: Fed Chair Jerome Powell’s set to drop some knowledge at the Economic Club of New York on Thursday. Plus, we’ve got regional Fed presidents and Fed Governors Lisa Cook and Christopher Waller lined up for some noteworthy speeches this week.
Last week, the bond market experienced some notable fluctuations. Despite inflation data from the Producer Price Index and Consumer Price Index not aligning with investor expectations, the 10-year Treasury note performed well. This was attributed to safe-haven flows and the anticipation that inflation rates would stabilize in the upcoming months as higher rates begin to slow the economy. Specifically:
- The 2-year note yield decreased by one basis point over the week, settling at 5.05%.
- The 10-year note yield saw a more significant drop, declining by 15 basis points to 4.63%.
However, the Treasury market had to navigate some less-than-stellar auction results. The 3-year note, 10-year note, and 30-year bond auctions all faced relatively soft demand. This was particularly evident on Thursday after the 30-year bond auction, which led to a noticeable uptick in rates. Yet, when geopolitical concerns intensified on Friday, a surge in safe-haven flows largely offset the weakness from Thursday’s sell-off.
Furthermore, several Federal Reserve officials commented throughout the week, suggesting that the rise in long-term rates had tightened financial conditions. This might provide the Fed with some flexibility regarding the policy rate in the future.
Oil & Energy
The escalating conflict between Israel and Hamas has reignited concerns over oil availability, with global leaders anxious about a potential widespread regional conflict. If this tension spreads to major oil-producing areas, we might see oil prices skyrocketing past $95 per barrel (WTI).
Gold & Precious Metals
Gold, much like the CHF, is enjoying a boost due to its reputation as a safe bet during turbulent times. It’s currently on an upward trajectory, surpassing the $1809 per ounce support level. Yet, for gold enthusiasts hoping for a return to its peak, the magic number to watch is $1,960; surpassing this could pave the way to revisit the record highs near $2080.
Bitcoin’s performance has been lackluster lately, witnessing a drop of over 4% since the start of the week, hovering around the $26,800 mark currently. Its crypto cousin, ether, hasn’t fared any better, plunging over 5% in the same timeframe. For nearly seven months, or to be precise, 210 days, bitcoin enthusiasts have observed its value fluctuating between $25,000 and $30,000. Amidst this, the crypto community is buzzing with chatter about Sam Bankman-Fried’s ongoing trial.