Hello, I’m Greg Curvall, Senior Portfolio Manager with Fifth Third Bank.
US equities were lower last week as the S&P and Nasdaq both posted declines after back-to-back weekly gains. The yield on the 10-year Treasury finished the week at 4.16 percent, while the short-end of the yield curve rose to the highest levels since 2007. The dollar index was a bit stronger, gold finished the week up almost two percent, while WTI crude was up 5.4 percent for the week.
The Fed's November FOMC meeting ended with a 75 basis point hike, as expected. While the statement was seen as dovish, Chair Powell's press conference hit on a number of hawkish themes, including no pause on rate hikes anytime soon, that the Fed is willing to overtighten than undertighten, and that the terminal rate forecast is mover higher.
Last week’s October nonfarm payrolls report showed that the US economy added 261K new jobs last month, while September saw a big upward revision. Although the number was better than expected, it still marked the slowest pace of job gains since December 2020.
China was also a big tailwind this week after heightened speculation that it could be getting ready to fully reopen its economy as it begins to pivot away from its Zero Covid policy.
Earnings season is winding down, with 85 percent of S&P 500 companies having reported. Third quarter earnings have been better-than feared, but analysts are starting to lower their earnings expectations for 2023.
This coming week is all about the midterms. Many are calling for a Republican sweep, with higher conviction for the House than the Senate. If the sweep occurs, markets will likely jump, but maybe not as much as you’d think, given that a Red sweep is pretty much consensus at this point.
The economic calendar is somewhat light this week. On Wednesday we get Wholesale Inventories. On Thursday, we will get the Consumer Price Index, or CPI. Then we finish up the week with the University of Michigan Consumer Sentiment number. The CPI report, a very popular gauge of inflation, will definitely garner the most attention. Unfortunately, the inflation data for November isn’t likely to show improvement. Currently, the Cleveland Fed is forecasting a 0.7 percent monthly increase for October CPI, which would be the highest monthly inflation reading since June.
As always, we will be watching and reporting back to you next week. Thank you.