Weekly Market Update: November 7, 2022

Market Data as of Week Ending: 11/4/2022 unless noted otherwise

U.S. stock prices declined last week as hawkish sentiment from Fed Chairman Powell's press conference dashed hopes for an impending pivot in monetary policy. Third quarter earnings results continue to come in above estimates with 85% of S&P 500 companies now reported. Multiple sectors saw positive earnings surprises last week, most notably, health care and energy. Small and mid-sized companies generally outperformed their large cap peers, while the growth factor was a headwind for the second straight week. Eight of the eleven sectors ended the week lower as the communication services and information technology sectors lagged. The energy, materials, and industrial sectors were able to eke out a gain. Developed foreign and emerging markets stocks recorded a gain for the week, outperforming domestic equities by a wide margin.

U.S. Treasury yields rose as the Fed and Bank of England each announced a 0.75% interest rate hike. The 10-year U.S. Treasury yield increased to end the week at 4.25%, while the 2-year yield rose to 4.73%, its highest level since July 2007. Long duration lagged last week as all segments across the bond market recorded losses. Investment grade corporate bonds outperformed across the board last week. Yields rose for both investment grade corporate and high yield bonds, finishing the week at nearly 6.0% and 9.2%, respectively.

Economic reports were mixed for the week as the labor market provided a mixed picture. The Chicago PMI dropped to 45.2 in October, the second straight month of contraction. Manufacturing data was slightly better than expected but continued its fall as the ISM manufacturing index slipped to 50.2 from 50.9 in October, just above the breakeven level and its lowest level since May 2020. The ISM services index fell to 54.4 in October as the U.S. services industry grew at its slowest pace in nearly 2-1/2 years, due to higher prices. U.S. factory orders rose 0.3% in September as defense and aircraft spending rose. The U.S. added a surprisingly strong 261,000 new jobs in October, outpacing estimates and underscoring the strength of the labor market. However, the U.S. unemployment rate rose to 3.7% from 3.5% as more people lost jobs and the size of the labor market shrunk. The Bank of England (BoE) increased rates by 0.75% to 3%, marking its highest level since 2008, to battle inflation that is predicted to stay above 10% for the next six months and above 5% in 2023.

See it by the numbers.

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