Markets Rally on Big Tech Earnings; Bonds Lag
Good morning, and welcome to November already,
The Dow (+0.8%), NASDAQ (+2.2%) and S&P 500 (+0.7%) each gained modestly for the week. Conversely, taxable bonds fell about 0.6% and tax-free municipal bonds fell about 0.1%. The 10-year Treasury yield gained 0.1% to finish the week at 4.09%.
The government shutdown has now entered its 5th week and 2nd month, with no real end in sight, as the impasse in Congress continues. The shutdown has now reached the point that it will begin to adversely affect many more Americans than just government workers, as Federal social aid programs are now being impacted. Less importantly, many economic reports have also been halted because no data is being reported. Thus, the only relevant economic report last week was that the Fed cut interest rates by 0.25%, as expected. However, the markets quickly dropped sharply that afternoon when Fed Chairman Powell remarked that a rate cut in December was not a foregone conclusion, disappointing investors who quickly sold stocks and bonds.
More favorably, stocks started the week on a strong note on eased tariff concerns and are looking to start off this week on a positive note for the same reason, as President Trump met with China’s President Xi to further ease trade tensions between the world’s two largest economies. Plus, several of the huge tech companies reported strong earnings, driving up the AI-related stocks that have pushed up the markets for the past three years. As such, the tech-heavy NASDAQ significantly outperformed the other two major indices. As for other earnings reports, they have been quite positive so far this quarter, with 80% of companies reported earnings that beat their estimates. Many more earnings will occur this week, concluding more than half of the market’s earnings reports this quarter. It’s been quite a rally, and there are reasons to believe it may continue for a while, despite some concerns that the markets may be overpriced.
Have a great day and terrific week!
Source: Yahoo Finance
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The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. Government bonds and Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.
