This past week continued a bear trend as investors looked for an indication from the Fed to stock rate increases. Some market analysts have suggested that the market is oversold due to fear of increased Fed rates. What I see is an uncertain Fed, which could be an opportunity, but also a landmine for investors. Here are the key points this week:
- The S&P 500 faced a 10.3% decline, teasing the 4,100 level.
- Utilities sector recorded a 1.2% gain, while communication services and energy sectors declined by 6.3% and 6.2%, respectively.
- Alphabet (GOOG) saw a 9.8% drop, while Microsoft (MSFT) and Amazon.com (AMZN) enjoyed positive reactions post their quarterly results.
- Geopolitical tensions added to the market’s volatility, with significant developments in Syria and Gaza.
- Economic indicators painted a mixed picture, with a 4.9% real GDP growth in Q3, a 0.3% increase in the September Personal Income report, and a 0.7% rise in the Spending report.
The stock market’s journey is always unpredictable. But armed with these numbers, we can at least make some sense of the madness. Here’s to hoping for a smoother ride ahead!
The S&P 500’s Tumble: By the Numbers
The week kicked off with the S&P 500 taking a significant dip, slipping below its 200-day moving average. By the time Friday rolled around, it had plummeted a staggering 10.3% from its July 31 high, teasing the 4,100 mark. In raw numbers, that’s a drop from the July 31 closing high to a nerve-wracking 4,103 by week’s end. And it wasn’t riding solo. The Invesco S&P 500 Equal Weight ETF (RSP) and the market-cap weighted S&P 500 both faced a 2.5% setback.
In the sector arena, only the utilities managed to keep their head above water, recording a 1.2% gain. On the other end of the spectrum, communication services and energy sectors were hit hard, declining by 6.3% and 6.2%, respectively. Alphabet (GOOG) was a significant contributor to this decline, with its stock plummeting by 9.8% due to underwhelming growth in its cloud business.
Meanwhile, Meta Platforms (META) wasn’t far behind with a 3.9% drop post its earnings report. However, every cloud has a silver lining; Microsoft (MSFT) and Amazon.com (AMZN) saw positive reactions, with their stocks shining post their quarterly results.
Geopolitical Drama: The Numbers Game
The geopolitical scene added its fair share of drama to the mix. The US’s decision to launch airstrikes against Iranian-backed targets in Syria sent shockwaves through the market. And with Israel intensifying ground operations in Gaza, investors were left grappling with these developments, especially as they unfolded right on the eve of the weekend.
Economic Data: The Silver Lining
On the economic front, there was a glimmer of hope. The economic calendar showcased a robust 4.9% real GDP growth in the third quarter. But it wasn’t all sunshine and rainbows. The September Personal Income report clocked in at 0.3%, while the Spending report recorded a 0.7% increase. This mixed bag of data suggests that the Fed might be in two minds about slashing rates in the near future.
To wrap it up, the stock market was on a roller coaster ride this past week, with numbers swinging in all directions. The market’s reaction was a blend of highs and lows, with specific stocks shining and others facing the heat.
CALENDAR & MOVERS
- Wednesday: Fed Interest Rate Decision
- Friday: Unemployment Rate (October)
- Fed Talks
- Middle East Tensions
FED WEEK HIGHLIGHTS
Investors have their eyes peeled on the Federal Reserve’s recent policy meeting, eagerly awaiting insights on the economic trajectory and interest rate predictions. The buzz on Wall Street suggests that the Fed might have hit its rate ceiling and might hold onto the current rates a tad longer. Jerome Powell, the Fed Chair, hinted that surging bond yields might pave the way for a tighter policy, potentially sidelining any immediate rate hikes. Yet, if the Fed hints at freezing the rates longer than anticipated, we might see an uptick in yields, further deepening the bond market’s historic slump.
A PEEK INTO THE LABOR MARKET
Come Friday, all eyes will be on the U.S. jobs report for October. Predictions hint at a steady, albeit decelerating, labor market with the unemployment figure sticking to 3.8%. The labor market’s robustness has been the economy’s backbone, and any uptick in unemployment might see investors flocking to secure assets like bonds and the U.S. dollar. Wage growth is another metric on the radar, anticipated to clock in at an annual 4% – the lowest since the pandemic’s onset. Such a figure might bolster the argument that the Fed’s tight policy is effectively taming inflation.
EARNINGS SEASON RUNDOWN
As the earnings season rolls on, Apple (AAPL) stands in the spotlight, with hopes it’ll bring some balance to the mixed results from other tech giants. Slated to unveil its earnings post-market close on Thursday, any significant move could sway the broader market, especially with the Nasdaq already 10% down from its summer peak. Other big names like McDonald’s (MCD), Starbucks (SBUX), Airbnb (ABNB), and PayPal (PYPL) are also set to disclose their earnings, making consumer spending a hot topic this week.
BANK OF ENGLAND’S MOVE The Bank of England (BOE) is gearing up for its rate decision meeting this Thursday. The forecast? Rates might remain unchanged at 5.25% for another month. The BOE is likely to emphasize its stance on maintaining elevated rates for the foreseeable future, hinting that any inflationary pressures might trigger more rate hikes. Investors are also on the lookout for the BOE’s updated quarterly economic forecast, which might project a stagnant growth curve for the upcoming quarters.