Hello, I’m Greg Curvall, Senior Portfolio Manager with Fifth Third Bank.
US equities were mostly lower last week, dropping on four of five days but catching a big rally on Thursday when the S&P 500 jumped 5 percent after touching a fresh year-to-date intraday low. Treasuries were weaker. The 2-year finished the week near 4.50 percent and the 10-year yield at one point Thursday hit 4.22 percent before ending just above 4 percent week’s end. The dollar was better overall, gold finished down 3.5 percent, and oil was weaker, with WTI settling down 7.6 percent after a big 16.5 percent gain the prior week on OPEC+'s output-target cut.
Despite an impressive bounce on Thursday, the path of least resistance last week remained to the downside amid the Fed's continued focus on the higher-for-longer policy approach, as well as persistent worries about a coming slowdown in the US and abroad. And while there were thoughts that the bar for Q3 earnings has been lowered, there are still broad concerns about headwinds from excess inventories and dollar strength. At the same time, uncertainty about China's continued zero-Covid approach, the unsettled situation in Ukraine, firming crude prices, and fiscal-policy chaos in the UK have weighed on risk assets.
Last week was a big week for reports regarding inflation. September Consumer Price Index, or CPI, came in hotter than expected on both the headline and core measures. September Producer’s Price Index, or PPI, also surprised to the upside on the headline, though core prices were in line with consensus.
Analysts noted that despite the hotter inflation data last week, the narrative hasn’t changed all that much. Fed officials have clearly and repeatedly highlighted the bank's commitment to moving rates into restrictive territory until there are clear signs that inflation is moving back toward its 2 percent target. Market expectations were for a 75 basis point move in November, and these only firmed in the wake of last week's data.
Next week sees the Q3 earnings season start to ramp up. Other than that, it will be a fairly light week of economic updates, primarily featuring September housing data, the NY Fed's Empire survey, and the Philadelphia Fed manufacturing survey. The Fed's Beige Book report will be released on Wednesday. There are also a good amount of Fed speakers on the calendar later in the week.
As always, we will be watching and reporting back to you next week. Thank you.
