The Dow (-2.1%), NASDAQ (-2.6%) and S&P 500 (-2.5%) fell sharply for the week, with the NASDAQ and S&P 500 falling into correction territory (dropped more than 10% from its recent high). Taxable bonds reversed their recent downward trend and gained about 0.6%, but tax-free municipal bonds fell about 0.2%. The recently volatile 10-year Treasury bond yield dropped 0.09% to finish the week at 4.83%, and mortgage rates are approaching 8%.
Last week, the US reported an extremely strong Q3 Gross Domestic Product (GDP) report, as the US grew by a stunning 4.9% annualized rate, compared to 2.1% in the 2nd quarter. Q3 was also marked by a consumer spending rate that grew 4.0%, compared to 0.8% in the second quarter. These data go hand-in-hand, as the consumer makes up about 68% of the US economy. The Fed-favored inflation measure, PCE (Personal Consumption Expenditures), was reported last week in line with expectations, so it had no impact on the markets. Meanwhile, we are in the teeth of corporate earnings season, which was led by four of the technology behemoths – Microsoft, Amazon, Google, and Meta (Facebook). Microsoft and Amazon produced blockbuster earnings, and their share prices were rewarded by it. Meanwhile, Google and Meta reported disappointing earnings, and their share prices got punished.
In the week ahead, the news will be highlighted by the Fed on Wednesday, but nearly everyone is expecting they will hold rates the same. The world’s largest stock, Apple, will report its earnings this week, as well as several other major US corporations. So, investors will be watching that closely, but more on their future projections of revenues and profits. At the end of the week will be the September jobs and job openings reports, which also serve as important data points for the Fed when making their interest rate decisions. So, unless there are significant changes in economic data, corporate earnings will be taking center stage this week.
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