 | AUTHOR: Jason Roque, MS, CFP®, APMA®, AWMA® TITLE: Investment Adviser Rep – CCO TAGS: S&P 500, NASDAQ, FRB, Inflation |
Markets had their largest weekly gains in 4 months! Is any rally from this point sustainable or is this fool’s gold?
Monday S&P 500 2.65% | NASDAQ 3.43%
Corporate earnings impressed as Bank of America, Charles Schwab, and Bank of NY Mellon all beat expectations. Additionally, buoying stocks was news that the UK’s feared “mini-budget” to raise spending and likely inflation was scrapped. This led to a softer dollar on the day, which yielded equity gains.
Tuesday S&P 500 1.14% | NASDAQ 0.90%
Markets rallied for a second day on the back of better-than-expected earnings. Nine of ten major companies reported beating expectations. Gains may have been greater had it not been for 2-year yields reaching their highest level this year (4.61%).
Wednesday S&P 500 0.67% | NASDAQ 0.85%
While corporate earnings impressed for the day, interest rates on the 10-year treasury rose above 4.1%. The rise in rates was a stark reminder that while current earnings are favorable, the forward picture is still discouraging. The NASDAQ led the way lower, as is typical for a day marred by interest rate concerns.
Thursday S&P 500 0.80% | NASDAQ 0.62%
A Federal Reserve Bank (FRB) official spoke on Thursday and their comments were hawkish. They indicated disappointment at how little of an impact the actions of the Fed have had on inflation. This signals a 0.75% hike in November and perhaps another 0.75% in December. Markets lost ground on the higher rate sentiment.
Friday S&P 500 2.37% | NASDAQ 2.31%
Markets bounced on Friday on a lower 10-year yield. A signal of cautious optimism that the FRB won’t be so aggressive with rates in 2023. The likelihood of a recession in early 2023 looms for stocks as hopes of a more passive FRB rise.
Conclusion S&P 500 4.74% | NASDAQ 5.22%
The week was the best week for all three major indices dating back to June. A point where we were just coming off being down 23.55%. The S&P 500 reached -25.43% on October 12th. The price environment has been improving as the earnings season is not as bad as everyone expected. This rally is not to be believed. The bounce will likely feel nice, but any rally right now should be questioned. As rate hikes continue, inflation persists and recessions loom across the globe, there is little optimism to be had.
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