The Week In Review 11/13/2023

“Computers are useless. They can only give you answers.” – Pablo Picasso

Good Morning ,

The market had a decent showing last week on the heels of the previous week's big gains. Market participants were digesting another heavy flow of earnings news, but that news was largely overshadowed by moves in the mega cap stocks.

The broader market showed nice resilience to selling despite many participants thinking stocks are due for a pullback. The S&P 500 is now up 7.2% from its low close on October 27.

Small and mid-cap stocks were an exception, relenting to some selling pressure this week. The Russell 2000 fell 3.2% and the S&P Mid Cap 400 declined 1.6%.

Six of the 11 S&P 500 sectors logged gains this week. The heavily weighted information technology sector (+4.8%) and communication services (+2.2%) sectors were the best performers followed by consumer discretionary (+0.9%). The energy (-3.8%), utilities (-2.6%), and real estate (-2.1%) sectors saw the biggest declines.

A jump in interest rates followed some weakly received Treasury auctions this week, along with commentary from Fed Chair Powell, this slowed the rebound momentum for the broader market.

The 2-yr note yield climbed 19 basis points this week to 5.05%. The 10-yr note yield rose seven basis points this week to 4.63%. Sales of 3-yr and 10-yr notes on Tuesday and Wednesday, respectively, met okay enough demand for the stock market, but Thursday's 30-yr bond auction was met with dismal demand.

There were several Fed officials speaking last week, but the market was mostly focused on Fed Chair Powell's IMF panel discussion on Thursday. Mr. Powell largely reiterated his remarks from November 1, saying "If it becomes appropriate to tighten policy further, we will not hesitate to do so."

Market Snapshot…

• Oil Prices – Oil prices were down 4% for the week on fears the global economy is on the cusp of a slowdown. West Texas Intermediate crude futures (WTI) gained $1.43, or 1.89% to close at $77.71 a barrel. Brent crude futures rose $1.42, or 1.77%, to close at $81.43 a barrel.
• Gold– Gold prices fell more than 1% with hawkish remarks from the Fed adding to the downslide. Spot Gold dipped 1.1% to $1,994.28 per ounce. U.S. gold futures settled down 1.6% to $1,937.70. Silver closed out the week at $22.281.
• U.S. Dollar– The dollar index was down 0.06% on the Fed’s comments that the central bank could hike rates again if inflation stays above its target. The index was at 105.85. Euro/US$ exchange rate is now 1.069.
• U.S. Treasury Rates– Treasury yields changed little as investors pondered what is ahead for inflation and the monetary policy. The yield on the 10-year Treasury note was near the flatline at 4.63%.
• Asian shares were mixed in overnight trading.
• European markets are trading higher.
• Domestic markets are trading lower this morning.

According to the University of Michigan consumer survey, inflation expectations are now at 12-year highs over the next five to 10 years. Consumers see costs rising at an annual rate of 3.2% over that time frame. They also see costs rising 4.4% over the next 12 months.

Earnings season is winding down. So far, 92% of S&P 500 companies have reported. Of those companies, the blended year-over-year earnings growth rate is 4.1%.

This week will feature tomorrow's CPI report, and PPI on Wednesday. There will be two more such inflationary reports before the Fed’s next FOMC meeting in December. Barring any surprise moves, we don’t expect this week's economic news to move the needle on the Fed’s anticipated decision at the December meeting. Despite the Fed’s dot plot projecting one more rate hike before year-end, we believe that the economy is trending in the direction the Fed would like.

As of today, the CME FedWatch Tool is indicating an 85.8% probability that the Fed does not raise interest rates again in December. The December FOMC meeting is a way off and we have much inflation data to consider before then.

Have a wonderful week!!

The opinions expressed herein are those of Michael Hilger and not necessarily those of Raymond James & Associates, Inc., and are subject to change without notice. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. There is no assurance any of the trends mentioned will continue or forecasts will occur. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Investing involves risk and you may incur a profit or loss regardless of strategy selected.

The information contained herein is general in nature and does not constitute legal or tax advice. Inclusion of these indexes is for illustrative purposes only. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor's results will vary. Past performance does not guarantee future results. The Dow Jones Industrial Average (INDU) is the most widely used indicator of the overall condition of the stock market, a price-weighted average of 30 actively traded blue chip stocks, primarily industrials. The Dow Jones Transportation Average (DJTA, also called the "Dow Jones Transports") is a U.S. stock market index from the Dow Jones Indices of the transportation sector, and is the most widely recognized gauge of the American transportation sector. Standard & Poor's 500 (SPX) is a basket of 500 stocks that are considered to be widely held. The S&P 500 index is weighted by market value, and its performance is thought to be representative of the stock market as a whole. The NASDAQ Composite Index (COMP.Q) is an index that indicates price movements of securities in the over-the-counter market. It includes all domestic common stocks in the NASDAQ System (approximately 5,000 stocks) and is weighted according to the market value of each listed issue. The Russell 2000 index is an unmanaged index of small cap securities which generally involve greater risks

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