Tensions subsided on the world stage this week but there was plenty of news to review close to home. Will strong corporate earnings and a rate cut stabilize markets or are we in for some more ups and downs?
Monday
S&P 500 1.56% | NASDAQ 2.21%
Markets accelerated at the open as tensions eased surrounding increased tariffs on China. Rare-earth metals continue to be front and center for trade negotiations. Much of the rise on Monday was the rebound trade from last week’s fall.
Tuesday
S&P 500 0.16% | NASDAQ 0.76%
The Nasdaq retreated as little economic data was due to be released on the day. Committee members, including Chairman Powell, stood by their willingness to cut rates later this year. Big banks announced earnings for the third quarter, exceeding expectations.
Wednesday
S&P 500 0.40% | NASDAQ 0.66%
The Federal Reserve’s “Beige Book” was released on Wednesday and markets rallied as another cut was forecasted in late October. The book gives economic data to inform policy makers on the health of the economy. The focus has been on employment as of late and consumer spending will also be under the microscope.
Thursday
S&P 500 0.63% | NASDAQ 0.47%
Markets fell on news of 2 regional banks disclosing bankruptcies in the auto lending industry. In a normal month, retail sales data would’ve been released today, but the government shutdown hindered that release. Little information resulted in a move out of equities.
Friday
S&P 500 0.53% | NASDAQ 0.52%
Markets moved higher on Friday but not without some volatility. The Volatility Index (VIX) jumped to highest levels in 5 months as concerns were raised about consumer credit this week. Stock buyers came out looking for opportunities, however, from the previous day sell-off.
Conclusion
S&P 500 1.70% | NASDAQ 2.14%
This week had its highs and lows as investors sifted through the little economic data that was available. Good news from the prior week slump around rare earth trade has yet to materialize but tensions have subsided. The bounce this week was attributed to comments made by Federal Reserve members indicating that additional rate cuts are merited. Rate cut expectations moved closer to certain but news of increased credit risk from banks was not taken lightly. The contagion effect in banking was largely brushed off but may reflect the stability of U.S. Households in the near-term. Financial companies have benefitted from strong employment numbers and consistent loan underwriting so far this year. If the workforce starts to soften, the Federal Reserve may get more assertive with their rate-cutting policy. As more rate cuts trickle through the financial system, expect more refinancing opportunities to follow.
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