Market Summary – October 16, 2023

Last Week’s Summary

  • S&P 500 Index rose 0.47%
  • International Equities rose 1.18%
  • Emerging Markets rose 1.52%
  • U.S. 10-Year Treasury Yield fell to 4.61%
  • CPI stayed flat at 3.7%; CPI Core fell to 4.1%
  • PPI rose to 2.2%; PPI Core rose to 2.7%
  • Initial Jobless Claims rose to 209k
  • U. of Mich. Sentiment fell to 63
  • U. of Mich. 1-Year Inflation rose to 3.8%

What to Watch for This Week

  • M, 10/16/23 Empire Manufacturing
  • T, 10/17/23 Retail Sales Advance, Industrial Production
  • W, 10/18/23 MBA Mortgage Apps, Housing Starts
  • Th, 10/19/23 Initial Jobless Claims, Leading Index, Philadelphia Fed Business Outlook

Weekly Market Recap

Stocks tumbled while bond values soared amidst escalating tensions in the Middle East, leaving traders in search of safe havens ahead of the weekend. Earlier this week, the Core Consumer Price Index printed a 4.1% increase, marking a 0.3% uptick from the previous month and the lowest level since September 2021.

This persistent decline in inflation is prompting speculation among market participants about the Federal Reserve’s potential for raising interest rates later this year and the expected duration of elevated rates before a shift to rate cuts in the following year.

The market is factoring in a 33% probability of a rate hike during the December meeting, with the expectation of rates remaining steady through the 2nd quarter of the next year. Federal Reserve minutes from Wednesday revealed that central bank officials agreed that monetary policy remains restrictive for an extended period to further subdue inflation, all while acknowledging that risks have become more balanced.

Producer Prices saw a 2.2% increase this month, indicating that stubborn inflation and higher interest rates might not yet be at an end. Big banks kicked off the earnings season this week, with JPMorgan and Wells Fargo reporting robust earnings, setting a positive tone. Several other major banks are set to report their earnings in the coming week.

Furthermore, in early October, U.S. consumers’ expectations for year-ahead inflation surged significantly, contributing to a substantial deterioration in Americans’ perceptions of their financial situations and overall sentiment. Oil spiked this week to $87/barrel amidst the Middle East conflict.

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