Last Week’s Summary
- S&P 500 Index rose 5.88%
- International Equities rose 4.26%
- Emerging Markets rose 3.12%
- U.S. 10-Year Treasury Yield fell to 4.57%
- FOMC left rates unchanged at 5.25-5.5%
- Initial Jobless Claims rose to 217k
- Change in Nonfarm Payrolls fell to 150k
- Unemployment Rate rose to 3.9%
What to Watch for This Week
- T, 11/7/23 Trade Balance
- W, 11/8/23 Wholesale Inventories, MBA Mortgage Apps
- Th, 11/9/23 Initial Jobless Claims
- F, 11/10/23 U. of Mich. Sentiment, U. of Mich. 1-Year Inflation
Weekly Market Recap
Stocks surged while bond yields declined, driven by indications of a slowdown in both the labor market and services. This reinforced the belief that the Federal Reserve has concluded its rate-hiking cycle and increased expectations of rate cuts as soon as June.
The S&P 500 rallied by nearly 6%, marking its strongest week of 2023. The VIX, often referred to as the “fear gauge,” saw its most significant weekly drop since December 2021, closing the week back below 15. Treasuries also gained ground, with Two-Year Yields dropping by 15 basis points to 4.84% and the 10-Year dropping 26 basis points to 4.57%.
Market sentiment has shifted significantly, with Fed swaps now indicating only a 16% chance of another interest rate hike by January, and a cut is fully priced in for June rather than July. This more dovish outlook is influenced by several factors, including the U.S. service sector expanding at the slowest pace in five months, moderating job growth, and a rise in the unemployment rate to 3.9%.
Nonfarm payrolls increased by 150,000 last month, following a downward revision from the 297,000 reported in September. The softening of the economy and labor market aligns with what the Federal Reserve has been monitoring for some time.
In light of this week’s market rally, the price of oil dropped below $81 as the risk premium associated with the ongoing Israel-Hamas conflict dissipated.
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