Hello, this is Josh Waynick, Investment Strategist at Fifth Third Bank
Major US equity indices gave investors something to be thankful for this past week with strong returns and positive news on the inflation front. Specifically, the S&P 500 returned 2.3%. The Nasdaq Composite was up 2.4% and the Dow Jones Industrial Average rose 2.1% for the week. The good news for equity investors was shared by bond investors as the U.S. Treasury yield curve saw rates drop across all term points. The U.S. 10-year Treasury Note yield fell to 4.44% with the U.S. 2-year Treasury Note yield falling to 4.89%. As a result, the 2-year/10-year U.S. Treasury Curve remained inverted and ended the week at 45 basis points inverted. The US Dollar index, measuring the relative strength of the US Dollar against a basket of global currencies, ended the week lower by 1.8%. Gold rose last week by 2.1%, ending the week at $1,981 per ounce. Additionally, West Texas Intermediate crude oil fell for the week by 1.7%, continuing the trend of lower oil prices. Specifically, at the end of Friday, WTI sat at $75.89 per barrel. This was the fourth week in a row of lower WTI oil Prices.
Looking at the Economy, the major news from last week came on Tuesday when investors digested a headline year-over-year CPI inflation reading of 3.2%, which is considerably lower than the prior months 3.7% and came in below market expectations. This positive news helped drive the S&P 500 higher 1.9% on Tuesday, which was the third best daily return this year. As a result of the good news, market expectations on prospective interest rates cuts from the US Central Bank moved up. The market now expects the first Federal Reserve interest rate cuts to happen in May 2024, as opposed to the previous week’s expectations for the first interest rate cut to occur in June or July 2024.
Turning our attention to the political landscape, a continuing government budget resolution bill was signed by President Biden after clearing the Senate this past week. The approved resolution keeps government funding levels static for the next two months, avoiding a government shutdown.
The most recent earnings season continues to wrap up for equity investors. As of this past Friday, over 94% of companies in the S&P 500 have detailed their financial result for third quarter 2023. Importantly, aggregate headline earnings are showing positive quarter-over-quarter growth of 2.8%. This is an important shift as the previous earnings seasons this year have detailed actual earnings declines.
Next week 11 of the remaining 29 companies who have not yet reported in third quarter 2023 earnings will do. Most notably, Nvidia is set to report on Tuesday the 21st Nvidia continues to be the big winner for 2023, outperforming all other securities in the S&P 500 this year by a considerable margin.
Shifting our lens to upcoming economic news, the week ahead is fairly quiet. On November 22nd market participants will get updates on the University of Michigan Sentiment Index. Currently expectations are for a slightly higher reading than last month. Finally, on Friday November 24th S&P Global will provide investors with their Purchasing Manager Index readings. Currently, a slight drop in both manufacturing and service PMI’s are expected domestically.
That concludes this week’s Economic Beat. We are off next week and will report back to you in two weeks.