Weekly Market Update: November 14, 2022

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

U.S. stock prices surged last week as investor sentiment improved with the most recent inflation data. Third quarter earnings results have been better than expected with 69% of S&P 500 companies reporting a positive earnings surprise. Growth stocks rotated back into favor while small and mid-sized companies generally lagged their large cap peers. All eleven major economic sectors ended the week with gains, most notably in the communication services and information technology sectors. Traditionally defensive sectors including utilities, consumer staples, and health care lagged, but still delivered modest gains. Developed foreign and emerging markets stocks recorded gains again for the week and generally outperformed domestic equities as foreign currencies strengthened relative to the U.S. dollar. U.S.

Treasury yields fell sharply in response to the CPI report that came in lower than expected. The 10-year U.S. Treasury yield decreased to end the week at 3.88% and the 2-year declined to 4.58%. Long duration significantly outperformed last week as all segments across the bond market recorded gains. Investment grade corporate bonds generally outperformed, despite the risk-on sentiment which typically favors high yield bonds. Yields declined for both investment grade corporate and high yield bonds, finishing the week at 5.6% and just below 9.0 %, respectively.

It was a lighter week for economic data, yet investors were fixated on the U.S. Labor Department’s Consumer Price Index (CPI), which is broadly used to measure inflation. The report was better than expected as the headline one-year growth rate decelerated to 7.7% in October. Investors celebrated that figure as it was the lowest rate since January and the monthly change was only 0.4%. Core inflation, excluding food and energy, also came in lower at 0.3% for the month of October but remains elevated at 6.3%, compared to the same period one year ago. Prices for used vehicles and medical care declined while housing, especially rents, remain elevated. There were some results that were disappointments. Consumer sentiment unexpectedly fell from 59.5 to 54.7, its lowest level since July. Initial jobless increased by 7,000 to 225,000; however, that figure represents a strong labor market despite the Fed’s attempt to reduce demand for labor. In China, exports dropped 0.3% last month which was well below the 4.3% increase that was expected and the first decline since early in the pandemic.

See it by the numbers.

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