Rising bond yields and uncertainty over whether this was the close of the Fed’s rate-hike cycle dragged markets lower last week despite solid corporate earnings results.
The Dow Jones Industrial Average sank 1.61%, while the Standard & Poor’s 500 fell 2.39%. The Nasdaq Composite index, which has led for much of the year, slumped 3.16%. The MSCI EAFE index, which tracks developed overseas stock markets, retreated 1.67%.1,2,3
Rising Yields Sink Stocks
Stocks rallied to start the week on earnings optimism before losing momentum over rising bond yields. Yields rose after traders speculated that strong economic data might persuade the Fed to raise rates. By mid-week, stocks turned lower as the 10-year Treasury yield moved above 4.9% for the first time since 2007, while mortgage rates hit 8%–the highest level since mid-2000.4
Stocks were under pressure Thursday as the 10-year Treasury yield moved closer to 5% and in response to comments from Fed Chair Powell that inflation remained too high. With the 10-year Treasury yield crossing above the 5% mark on Friday–and ahead of a weekend of uncertainty in the Middle East–stocks weakened further, ending a down week on a sour note.
Economic Strength, Housing Weakness
The economy continued to evidence surprising strength according to data released last week. Despite worries of a struggling consumer, consumers increased their spending as retail sales rose 0.7% in September–well above the forecast of a 0.3% rise, while industrial output jumped 0.3%, exceeding the forecast of a 0.1% gain.5
There were also updates on the state of housing. Housing starts rebounded 7.0% from August, though permits (an indicator of future housing starts) declined 4.4% month-over-month. Existing home sales were weak, falling 2.0% from August and 15.4% from a year ago. Existing home sales are on track to record their slowest year since 2011.6,7
This Week: Key Economic Data
Tuesday: Purchasing Managers’ Index (PMI).
Wednesday: New Home Sales.
Thursday: Gross Domestic Product (GDP). Durable Goods Orders. Jobless Claims.
Friday: Personal Income and Outlays. Consumer Sentiment.
Source: Econoday, October 20, 2023
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.
This Week: Companies Reporting Earnings
Tuesday: Microsoft Corporation (MSFT), General Electric Company (GE), Verizon Communications, Inc. (VZ), Alphabet, Inc. (GOOGL), General Motors Company (GM), The CocaCola Company (KO), 3M Company (MMM), Texas Instruments, Inc. (TXN), HCA Healthcare, Inc. (HCA), NextEra Energy, Inc. (NEE), Kimberly-Clark Corporation (KMB), The Sherwin-Williams Company (SHW), Danaher Corporation (DHR), PulteGroup, Inc. (PHM)
Wednesday: The Boeing Company (BA), International Business Machines Corporation (IBM), ServiceNow, Inc. (NOW), Thermo Fisher Scientific, Inc. (TMO), General Dynamics Corporation (GD), O’Reilly Automotive, Inc. (ORLY), T-Mobile US, Inc. (TMUS)
Thursday: Amazon.com, Inc. (AMZN), Intel Corporation (INTC), Ford Motor Company (F), Mastercard, Inc. (MA), Merck & Co., Inc. (MRK), Northrop Grumman Corporation (NOC), United Parcel Service, Inc. (UPS), Comcast Corporation (CMCSA), Honeywell International, Inc. (HON)
Friday: AbbVie, Inc. (ABBV), Exxon Mobil Corporation (XOM), Chevron Corporation (CVX), Colgate-Palmolive Company (CL)
Source: Zacks, October 20, 2023
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.
Footnotes and Source
1. The Wall Street Journal, October 20, 2023
2. The Wall Street Journal, October 20, 2023
3. The Wall Street Journal, October 20, 2023
4. CNBC, October 17, 2023
5. CNBC, October 17, 2023
6. CNN, October 18, 2023
7. The Wall Street Journal, October 19, 2023
8. IRS.gov, January 31, 2023
9. Formstack, July 19, 2023
Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.
The market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.
The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.
U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.
International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.
Please consult your financial professional for additional information.
This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG is not affiliated with the named representative, financial professional, Registered Investment Advisor, Broker-Dealer, nor state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.
Copyright 2023 FMG Suite.
