A Tale of Two Weeks within One (Market Recap Week Ending October 15
Dow 35,294 +548 or 1.5%
Nasdaq 14,897 +318 or 2.18%
S&P 4,458 +13 or 0.29%
U.S. 10 Year Treasury Yield 1.57%, (3.5 bp) or (2.2%)
A Tale of Two Weeks within One
Rising global interest rates pressured the markets lower the first half of the week. The first hint of change came Wednesday when despite continued higher than expected inflationary data and the news that a record 4.3 million Americans quit their jobs last month, the market merely churned and the Nasdaq rallied strongly as the U.S. 10-year Treasury yield began to back off the highs. Phenomenal earnings in the banking sector on Thursday completely changed the narrative regarding the markets, inflation, supply chain woes, Covid et al and the markets exploded higher across the board. Friday saw more good news on the earnings front, the first initial jobless claims report sub-300,000 since the beginning of the pandemic and a hopeful inflation data point with a lower-than-expected Producer Price Index and a huge September Retail Sales report.
Next week is another big week of earnings with Netflix, Tesla, chip makers Lam Research and Intel, consumer staples companies and four airlines. Of the 41 S&P 500 companies that reported thus far, 80% have beaten expectations. Four different Fed Presidents are scheduled to speak next week which should give us additional insight as to whether tapering will be announced during the November meeting or pushed back one more month at the December meeting.
Market Data Points Next Week
Monday – None of note.
Tuesday – Earnings: Netflix (NFLX), Proctor & Gamble (PG), Johnson & Johnson (JNJ), United Airlines (UAL).
Wednesday – Beige book. Earnings: Tesla (TSLA), Lam Research (LRCX), CSX (CSX).
Thursday – Initial Jobless Claims, Philly Fed Manufacturing Index, Existing Home Sales. Earnings: AT&T (T), Intel (INTC), Chipotle (CMG), American Airlines (AA), Southwest Airlines (LUV), Alaska Airlines (AA).
Friday – Markit Manufacturing & Services PMI. Earnings: American Express (AXP).
Last week’s trading…
Monday– Dow (250) to 34,496, Nasdaq (93) to 14,486, S&P (30) to 4,361.
- Equity markets fell today under pressure from rising global interest rates and commodity prices.
- Fixed income markets were closed today.
- Nine of the eleven S&P sectors traded negatively with Communication Services, Utilities and Financials the three worst performers. Only Materials and Real Estate traded up today.
- Merck (MRK) submitted its EMA request to the FDA for its Covid-19 pill which cuts hospitalizations and death by 50% in a small study of 700 people.
Tuesday – Dow (117) to 34,378, Nasdaq (20) to 14,465, S&P (10) to 4,350 .
- Five of the eleven S&P sectors traded in the green today with defensive sectors representing two of the top three; Real Estate, Consumer Discretionary and Utilities. The worst performers were Technology and Communication Services.
- The 10-year U.S. Treasury yield fell 3.4bp to 1.571%.
- The August Job Openings and Labor Turnover Survey (JOLTS) showed more than a ½ million decrease (down 659k to 10.4 mn) in job openings month over month. However, a record 4.3 million people quit their jobs last month mostly in the hospitality and restaurant sectors.
Wednesday – Dow (1) to 34,377, Nasdaq +105 to 14,571, S&P +13 to 4,363 .
- JPMorgan (JPM) and Delta Air Lines (DAL) both beat their Q3 earnings and revenues handily and both traded down as traders “sold the news.” It didn’t help that DAL issued a warning that higher fuel costs and other costs will pressure their Q4 numbers.
- Asset manager BlackRock (BLK) also beat their numbers, slightly missed their asset under management numbers and traded up 3.78%.
- Inflation was higher than expected again with CPI jumping 0.4% since last month and 5.4% year over year vs expectations of 0.3% and 5.3% respectively. The core number, ex-food and energy was a little better at 0.2% and 4% vs 0.3 and 4% consensus estimates.
- Tapering is coming in November according to the minutes released today from the September Federal Reserve Open Market Committee meeting.
- Nine of eleven S&P sectors traded higher today, led by the defensive sectors: Utilities, Materials and Consumer Discretionary.
- The 10-year U.S. Treasury yield traded down 2.5bp to 1.546%.
Thursday – Dow +534 to 34,912, Nasdaq +251 to 14,823, S&P +74 to 4,438.
- A triple shot of good news sent markets soaring today; jobless claims were the lowest since the pandemic started, an important inflation gauge was lower than expected and most importantly, the banks all exceeded their earnings expectations.
- Initial Jobless Claims were 296,000 vs expectations of 319,000 and last week’s slightly revised higher print of 329,000.
- The August Producer Price Index (PPI) fell to +0.5% vs expectations of 0.6% although the year over year number of +8.6% is the biggest number since the index was reconfigured in 2010.
- Banking Bonanza! Morgan Stanley (MS), Bank of America (BAC), Citigroup (C), and Wells Fargo (WFC) all posted better than expected earnings numbers. Also, it is important to note that the three retail banks mentioned above released over $1bn each back to their balance sheets for bad loan provisions during the pandemic that did not come to pass.
- All eleven S&P sectors traded higher led by Materials, Tech and Industrials.
- The 10-year U.S. Treasury yield fell another 3 bp to 1.516%.
Friday – Dow +382 to 35,294, Nasdaq +74 to 14,897, S&P +33 to 4,471.
- Earnings and good economic news pushed the markets higher to end the week.
- September Retail Sales surprised with an increase of 0.7% vs a forecast of –0.2% fueled by back-to-school spending.
- Goldman Sachs (GS +3.8%) reported a beat on both top and bottom lines attributing the outperformance to their trading business. Charles Schwab (SCHW) also beat their numbers handily and traded up 3.57%. Trucking giant JB Hunt (JBHT), despite stating that increased labor and machinery costs are here to stay, reported great numbers and traded up 8.7%.
- Eight of eleven S&P sectors to traded positively today led by Consumer Discretionary, Financials and Industrials. The three negative sectors were Communication Services, Consumer Staples and Utilities.
- The 10-year U.S. Treasury yield rose nearly 6 bp to 1.57%.
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