Stocks Mixed on Oil Prices and Inflation Worries; Bonds Gain Sharply

Good morning,

• The Dow (+0.4%), NASDAQ (-0.7%), S&P 500 (-0.5%), and EAFE (-1.5%) were mixed for the week. 
• Taxable bonds and tax-free municipal bonds rose sharply, gaining 0.5% and 1.1%, respectively.
• The 10-year Treasury yield fell 0.08% to finish the week at 5.00%.
• Oil prices moved higher again for the week and eclipsed $100 per barrel, causing some strain on the stock market.
• Concerns surrounding the level of debt in the AI industry caused additional pressure on those mega growth companies, as five of the seven Magnificent 7 companies fell for the week after getting crushed the prior week.

In economic news:

• The first full week of earnings season has demonstrated that companies remain very strong, but concerns over higher oil prices weighed on many stocks and future earnings expectations.  Earnings season picks up momentum this week with a larger number of companies reporting their earnings.
• Jobless claims fell to a near-record low since 1969, while the four-week moving average and continuing claims were also near 3-year lows.  As per many economists, the job market remains strong, as employers aren’t firing, but they’re not hiring, either.
• Leading Economic Indicators (LEIs) – formerly my favorite economic report - was flat in September but also showed a rise in the last 6 months, compared to falling the prior 6 months.  The LEIs have historically been a great predictor of the direction of the economy, but the sharply negative numbers also “predicted” a recession in 2023 and 2024 that didn’t happen, hence causing me to lose faith in those reports.  Regardless, it demonstrates that the US economy is on strong footing with a bright outlook.
• The Fed meets this week, but it is widely expected that the Fed will keep interest rates the same, which is often the case in advance of elections.  That said, a strong labor market and economy coupled with higher interest rates are the key ingredients for the Fed to raise rates.

Have a great day and terrific week!

^{Source:  Yahoo Finance}

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^{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.}