Economic Update
Market Month: October 2022
The Markets (as of market close October 31, 2022)
October saw stocks close higher, the first monthly gain since July. Investors were encouraged by hopes that the Federal Reserve will pull back from its aggressive interest-rate hike policy. In addition, solid third-quarter earnings could be a sign that the economy can withstand the battle to lower inflation. Each of the benchmark indexes listed here posted notable gains, led by the Dow, which rose nearly 14.0%. The Russell 2000 gained about 11.0%, followed by the Global Dow, the S&P 500, and the Nasdaq. After two consecutive quarters of retractions, the economy expanded at an annualized rate of 2.6% in the third quarter. Personal spending, which accounts for nearly 70% of the economy, increased 1.4% in the third quarter. A strong labor market and ample savings have supported consumer spending. The Treasury deficit for fiscal year 2022 was nearly half the total of the previous fiscal year. Industrial production increased, as did new orders for durable goods. However, not all economic indicators were positive. The housing sector continued to lag, impacted by rising mortgage interest rates. Inflation indicators, which had shown a decline in August, reversed course in September. The personal consumption expenditures price index and the consumer price index increased.
Market Week: October 31, 2022
The Markets (as of market close October 28, 2022)
Wall Street continued its weekly rally last week, with each of the benchmark indexes listed here posting solid gains. Traders focused on positive earnings reports from major megacap technology and communication companies rather than the latest data that showed inflation continuing to rise, opening the door for more interest-rate hikes from the Federal Reserve. Solid corporate earnings in the third quarter may be evidence that the economy can withstand the battle against inflation. However, a slowdown in manufacturing and the housing market could be an indication that the rate increases are impacting at least some parts of the economy. Nevertheless, stocks rallied for the second consecutive week, making it look likely that October will be a strong month.
Market Week: October 24, 2022
The Markets (as of market close October 21, 2022)
Wall Street enjoyed a notable surge last week, as investors clung to hopes the Federal Reserve may consider scaling back its aggressive policy stance against rising inflation. A report last Friday indicated that some members of the Fed are willing to debate a smaller interest-rate hike in December, while slowing down the pace of increases moving forward. The Dow, the S&P 500, and the Nasdaq notched their largest weekly gains in four months. Investors looked favorably on risk last week after some favorable company quarterly results, lower company stock valuations, and a reversal of economic policy in the United Kingdom, which led to the resignation of its prime minister. Long-term bond yields advanced last week, gold prices closed higher, while the dollar slipped lower. Crude oil prices dipped on fears of a global economic slowdown.
Market Week: October 17, 2022
The Markets (as of market close October 14, 2022)
Wall Street closed generally lower last week, with only the Dow able to garner a gain. The latest data showed inflation is stubbornly rising, which could lead to more hawkish rate hikes from the Federal Reserve. While some big financial institutions reported solid third-quarter earnings, a few major banks’ earnings were not so positive. Long-term bond prices slid lower, driving yields higher. The dollar continued to strengthen against a basket of currencies. Crude oil prices dipped lower as falling demand more than offset receding output.
Market Week: October 10, 2022
The Markets (as of market close October 7, 2022)
Market gains early last week were enough to outpace declines later, as stocks enjoyed their best weekly gains in a month. The Russell 2000, the Dow, and the Global Dow paced the benchmark indexes listed here. The S&P 500 climbed higher, while the Nasdaq was able to hold on to a marginal gain. Investors saw a strong labor report, which included an unexpected drop in the unemployment rate, as adding fuel to the Federal Reserve’s fire of continuing interest-rate hikes. Crude oil prices advanced for five consecutive days following an OPEC+ cut in production, prompting some analysts to predict prices will soon reach $100.00+ per barrel. Gas prices, which had steadily declined during the summer, are now heading higher. Last week saw 10-year Treasury yields rise 8.0 basis points, with the dollar and gold prices also advancing.
Market Week: October 3, 2022
The Markets (as of market close September 30, 2022)
Wall Street ended a very tepid month of September on a downswing. Each of the benchmark indexes listed here lost value last week, as investors continued to worry about the impact the Federal Reserve policies will have on the economy. The 0.3% increase in the August personal consumption expenditures price index certainly didn’t help support the possibility of an easing of the aggressive rate-hike tightening employed by the Fed. While stock values dipped, long-term bond prices also declined last week. With prices waning, bond yields rose higher. The 10-year Treasury yield jumped 25 basis points last week. Crude oil prices edged up, while the dollar slipped lower. Gold prices rose about $20.00 per ounce.
Quarterly Market Review: July – September 2022
The Markets (third quarter through September 30, 2022)
The ramifications of stamping down rising inflation dominated the markets in the third quarter. Investors weighed the balance between an aggressive government policy aimed at curbing price pressures against the possibility of those very policies leading to an economic recession. That dichotomy was not lost on Federal Reserve officials, who stoically made clear that “a sustained period of below trend growth” may be a necessary byproduct as part of the effort to bring down inflation. Ultimately, investors moved away from risk, sending stocks lower for the third straight quarter of 2022, while putting an exclamation point on the worst decline in the first nine months of a year in 20 years. By the end of the quarter, the Dow, the S&P 500, and the Nasdaq had entered into bear market territory. All three benchmark indexes are down at least 21.0% on the year. Crude oil prices declined sharply in the quarter for several reasons, including waning fuel demand, China’s ongoing COVID lockdown policy, the unexpectedly benign impact of sanctions against Russian oil exports, rising inflation, and the strength of the U.S. dollar. The strength of the dollar often weighs on oil and other commodities that are priced in that currency, making them more expensive to purchasers using other currencies. Bond prices declined during the quarter, pushing yields up. The 10-year Treasury yield jumped 83 basis points since the end of June and nearly 230 basis points on the year. Gold prices struggled to maintain any momentum, ultimately falling more than 7.50% in the quarter.
Market Week: September 26, 2022
The Markets (as of market close September 23, 2022)
Investors endured their second harrowing week in a row as the Federal Reserve continued to raise interest rates aggressively to combat inflation. New signs of slowing global growth and Russia’s threats to escalate the war in Ukraine provided more reasons for selloffs in the stock and bond markets by nervous investors. The Nasdaq, the Russell 2000, and the S&P 500 all sunk deeper into bear territory, and the Dow dropped to its lowest level of 2022. In a cruel twist of fate, bonds are not behaving like the port in the storm that investors tend to expect. Treasury prices have fallen and yields have risen to heights not seen in more than a decade. The dollar is exhibiting unusual strength against many foreign currencies, including the pound, the euro and the yen. Oil prices fell to their lowest levels since January.
Market Week: September 19, 2022
The Markets (as of market close September 16, 2022)
Inflation is still rising, albeit at a slower pace, according to the latest data out last week. This will likely support further interest-rate increases from the Federal Reserve and worries of a resulting economic recession. Stocks retreated, culminating in the worst week since June. The Nasdaq suffered through its worst week since January after falling nearly 5.5%. The S&P 500, the Russell 2000, and the Dow lost at least 4.0%. The Global Dow also ended last week well in the red. Crude oil prices declined for a third consecutive week, while gold prices continued to slide, despite a bump higher at the end of the week. The dollar inched higher. Year to date, while all of the benchmark indexes listed here are well below their 2021 closing values, the Nasdaq has fallen nearly 27.0%.
Market Week: September 12, 2022
The Markets (as of market close September 9, 2022)
Are investors accepting the Federal Reserve’s hawkish path to reduce inflation? Last week’s market performance may lend credence to that possibility, as each of the benchmark indexes listed here posted solid gains, reversing three weeks of losses. A jump in tech shares pushed the Nasdaq up to its highest level since late August. The S&P 500 passed its 100-day average, and the Russell 2000 added more than 4.0%. The dollar dipped lower, moving away from a record high. Gold prices increased. Crude oil prices decreased for the second consecutive week. There have been few signs that the aggressive interest-rate hike agenda pushed by the Fed will hinder the economy, possibly easing investor worries.