Weekly Update – October 23, 2023
The Week on Wall Street
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 midweek, 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.
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)
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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