An above-consensus consumer inflation number sent stocks tumbling in early Thursday trading before inexplicably surging higher in a stunning reversal that saw the Dow Jones Industrial Average rally 1,500 points from its intraday low. Before reversing, stocks had touched levels last seen in 2020. Friday surrendered much of the previous day’s gains, sending stocks mostly lower for the week.1
The stock market began the week on a volatile note, with the Nasdaq hitting a two-year low. Recession fears and new export controls may limit U.S. companies from selling advanced semiconductor chips and related manufacturing equipment to China.2
U.S. equities were mostly negative; Blue Chip securities being the lone bright spot with the Dow up 1.17%.
Among style boxes domestically, mid-caps and growth shares fared the worst as the Russell Mid Cap index and the Nasdaq Composite dropped -2.54% and -3.11%, respectively.
Developed international markets beat out Emerging Markets, but both were down over the week, the MSCI EAFE by -1.35%, MSCI EM by a more significant -3.81%.
U.S. bonds were negative for the week, with Bloomberg Barclays U.S. Aggregate Bond index down -1.19%.
The median U.S. asking rent rose 9% year over year in September to $2,002, the slowest growth since August 2021 and the first single digit increase in a year. That’s according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. September was the fourth-consecutive month in which annual rent growth decelerated, with rents climbing at half the pace they were six months earlier.4
According to The Wall Street Journal’s latest survey of economists, on average, economists put the probability of a recession in the next 12 months at 63%, up from 49% in July’s survey. It is the first time the survey pegged the probability above 50% since July 2020, in the wake of the last short but sharp recession.5
Airlines are raising prices worldwide in response to higher fuel and labor costs, and amid rebounding demand for travel as pandemic restrictions ease globally. Flights to China have soared beyond those increases—sometimes as much as 10 times higher than pre-pandemic fares—as Beijing’s continued adherence to zero-Covid policies has kept flights into the country scarce, while demand inches higher following a modest relaxation to China’s strict entry restrictions. A recent search on United Airlines Holdings Inc.’s website showed one-way economy tickets from San Francisco to Shanghai, with a stopover in South Korea, going for $4,000 or more next month.6
Reprinted with permission from BTN. Copyright © 2022 Michael A. Higley.
1 CNBC, October 13, 2022
2 CNBC, October 10, 2022
3 Data Obtained from Bloomberg as 10/14/2022
Producer Prices - PPI (headline and core): Producer prices (output) are a measure of the change in the price of goods as they leave their place of production (i.e. prices received by domestic producers for their outputs either on the domestic or foreign market).
CPI (headline and core): Consumer prices (CPI) are a measure of prices paid by consumers for a market basket of consumer goods and services. The yearly (or monthly) growth rates represent the inflation rate.
ISM Manufacturing Index - PMI Surveys track sentiment among purchasing managers at manufacturing, construction and/or services firms. An overall sentiment index is generally calculated from the results of queries on production, orders, inventories, employment, prices, etc.
ISM Services Index - PMI Surveys track sentiment among purchasing managers at manufacturing, construction and/or services firms. An overall sentiment index is generally calculated from the results of queries on production, orders, inventories, employment, prices, etc.
Retail Sales: Retail sales (also referred to as retail trade) tracks the resale of new and used goods to the general public, for personal or household consumption. This concept is based on the value of goods sold.
Job Openings: JOLTS: This concept tracks the number of specific job openings in an economy. Job vacancies generally include either newly created or unoccupied positions (or those that are about to become vacant) where an employer is taking specific actions to fill these positions.
S&P 500: The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities and serves as the foundation for a wide range of investment products. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization.
NASDAQ: The NASDAQ Composite Index is a broad-based capitalization-weighted index of stocks in all three NASDAQ tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of February 5, 1971.
Dow Jones Industrial Average: The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally the leaders in their industry. It has been a widely followed indicator of the stock market since October 1, 1928.
Russell Mid-Cap: Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000 Index, which represent approximately 25% of the total market capitalization of the Russell 1000 Index.
Russell 2000: The Russell 2000 Index is comprised of the smallest 2000 companies in the Russell 3000 Index, representing approximately 8% of the Russell 3000 total market capitalization. The real-time value is calculated with a base value of 135.00 as of December 31, 1986. The end-of-day value is calculated with a base value of 100.00 as of December 29, 1978.
MSCI EAFE: The MSCI EAFE Index is a free-float weighted equity index. The index was developed with a base value of 100 as of December 31, 1969. The MSCI EAFE region covers DM countries in Europe, Australasia, Israel, and the Far East.
MSCI EM: The MSCI EM (Emerging Markets) Index is a free-float weighted equity index that captures large and mid-cap representation across Emerging Markets (EM) countries. The index covers approximately 85% of the free float-adjusted market capitalization in each country.
Bloomberg Barclays US Agg Bond: The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate pass-throughs), ABS and CMBS (agency and non-agency).
Bloomberg Barclays High Yield Corp: The Bloomberg Barclays U.S. Corporate High Yield Bond Index measures the USD-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody's, Fitch and S&P is Ba1/BB+/BB+ or below. Bonds from issuers with an emerging markets country of risk, based on Barclays EM country definition, are excluded.
Bloomberg Barclays Global Agg: The Bloomberg Barclays Global Aggregate Index is a flagship measure of global investment grade debt from twenty-four local currency markets. This multi-currency benchmark includes treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging markets issuers.
Bloomberg Barclays Municipal Bond Index: The Bloomberg Barclays U.S. Municipal Index covers the USD-denominated long-term tax-exempt bond market. The index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds and prerefunded bonds.
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