Stocks Fall on Weak Economic Data and Tech Earnings; Bonds Down Modestly

Good morning, and welcome to November already.  And for those of you who haven’t been living under a rock, you know it’s also Election Eve.

The Dow (-0.1%), NASDAQ (-1.5%), and S&P 500 (-1.4%) each fell for the week.  Similarly, taxable bonds fell 0.6%, and tax-free municipal bonds were flat to slightly lower.  The 10-year Treasury yield gained an additional 0.13% to finish the week at 4.37%.

Last week was hit hard by multiple unfavorable economic reports associated with the jobs market and inflation.  The Job Opening and Labor Turnover Survey (JOLTS) fell, as well as the quit rate.  Each of these point to a labor market that is normalizing, following a tight labor market caused by the pandemic.  The October jobs report released on Friday showed only 12,000 new jobs were added in October, well below the expectations of greater than 100,000.  This report was also influenced by the Boeing strike and jobs lost due to the two hurricanes.  Lastly, the Fed-favored inflation gauge, Personal Consumption Expenditures (PCE), remained unchanged from the prior month, but the core readings are showing some inflationary pressure returning to the economy.  These reports all factor into the Fed’s decision to cut interest rates or keep them the same at their next meeting, which is Thursday.

We are now deep into corporate earnings season, and most of big tech companies reported last week.  Major tech companies largely reported good earnings, but a combination of lowered forward growth guidance and higher expected expenses led investors to take some profits off the table.  Tech stocks were down over 3% last week, despite good showings by Amazon and Google.

Lastly, this week is expected to be a volatile one.  In addition to the Fed interest rate announcement on Thursday, that is preceded by the elections on Tuesday.  This election year will decide the Presidential race, 1/3 of the Senate, and all of the House of Representatives.  Of course, recent history has shown that we may not actually know who was elected until a later date, and I find that a bit frustrating, but I digress.  As I have noted in prior reports, the election of President has less of a bearing on the markets than most would expect.  In fact, the markets have historically performed better when Congress is divided, and the worst is when there is a red or blue sweep.  In short, that provides checks and balances in government that is viewed favorably by investors.  See the chart below.

 Have a great day and terrific week!

^{Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.}

^{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.}