Throughout the past week, investors were on edge, carefully assessing whether the Federal Reserve might halt its interest rate hikes in response to the recent significant surge in long-term US Treasury yields. The yields continued to climb, eventually reaching their highest levels in 16 years on Friday, peaking at 4.88 % annually for 10-year Treasuries.
Friday also kicked off trading in the red, driven by a robust increase in job growth for September, marking the highest surge in 8 months. Naturally, this development rattled market players. However, after some reflection, investors started to view the job growth against a backdrop of declining wages as not entirely unfavorable, and gradually, the market began to rebound.
The week concluded on a bullish note, with indices managing not only to finish the day in positive territory but also to erase the week’s earlier losses. As a result, the S&P 500 and NASDAQ Composite indices broke their 4-week slump, adding +0.48% and +1.60%, respectively. The venerable Dow Jones, as always, lagged behind its younger counterparts, closing the week with a -0.3% loss.
The primary downward pressure on the market during the week came from the energy sector, which witnessed a substantial sell-off in the oil market following its late-September highs. This led to nearly a 10% drop in crude oil prices, subsequently dragging down the share prices of oil and gas companies.
The primary catalyst for this sharp sell-off was investors’ apprehensions about the Chinese economy’s growth. However, it’s worth noting that the Chinese market itself remained closed throughout the week due to national holidays commemorating the founding of the People’s Republic of China.
Does this recent pullback signify the end of the downturn? Not necessarily, but it’s noteworthy that the S&P 500 index at least held above the 4200-point mark, instilling hope that this support level may continue to hold the market up. Nevertheless, the market’s fate currently hinges not only on technical factors but primarily on macroeconomic developments and the outcomes of the forthcoming earnings season, set to kick off this week. Stay updated with the Economic Calendar on TradingView to keep track of these reports.
This week, in particular, stands out as one of the most critical in the near future, as numerous significant events converge. On the one hand, we have the scheduled economic events tied to the release of macroeconomic data on consumer inflation (CPI on Thursday) and industrial inflation (PPI on Wednesday). When we add to that the release of minutes from the most recent FOMC meeting by the US Federal Reserve, it’s clear that investors have much to ponder midweek.
However, from an economic standpoint, all of these factors are overshadowed by the commencement of the new earnings season, officially launching on Friday. This is when we’ll get to see the Q3 2023 results from financial giants like JPMorgan Chase & Co, Wells Fargo Company, and Citigroup. To stay updated, it might be the right time to learn how to use a stock screener.
Now, factor in the onset of tensions in the Middle East and the re-entry of the Chinese into the market following their week-long holiday. This creates a volatile mix with unpredictable outcomes. So make sure to carry out your analysis and look first before you leap.
