Weekend Update - Nov 3

The stock market had its best week since June, Sam Bankman-Fried is convicted, Verses Demos its Genius™ a whole new approach to AI and lets just say this changes everything.

Overview

• The stock market had its best week since June, with the S&P 500 gaining 5.9% and the Nasdaq jumping 8.1%. Gains were driven by strong corporate earnings and hopes that the Fed may be nearing the end of its rate hike cycle.
• The October jobs report came in lighter than expected, with the US economy adding 261,000 jobs versus estimates of 200,000. The unemployment rate rose to 3.7% from 3.5% 3. This potentially gives the Fed more room to slow rate hikes.
• Treasury yields fell sharply this week, with the 10-year yield dropping from 4.05% to 3.69% by Friday. Falling yields boosted stocks, especially rate-sensitive tech shares.
• October's ISM Manufacturing PMI dropped to 50.2 from 50.9, barely remaining in expansion territory. Services PMI fell to 54.4 from 56.7. This signals slowing growth as the Fed fights inflation.
• The October FOMC meeting kept rates unchanged but maintained a hawkish tone. Markets expect a 50 basis point hike in December but only one or two more in 2023.

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Corporate Earnings

• Major companies like Apple, Microsoft, Meta, Alphabet, and Amazon reported earnings this week. Results were mixed but generally better than feared.
• Apple fell despite beating on earnings. It warned of holiday slowdowns as consumers curb spending.
• Meta surged 20% as cost cuts led to an earnings beat. Microsoft cloud growth impressed.

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What to Watch

• US midterm elections on Tuesday could impact markets if results deviate notably from expectations.
• October CPI data out on Thursday will provide a key update on inflation trends.
• Fed speakers like Bostic, Bullard, and Mester could add color on the policy outlook this week.
• Retailers like Walmart and Home Depot report earnings and will give insight into the consumer economy.

The past week saw optimism return to markets on hopes of a less aggressive Fed. However, recession risks remain until clear evidence emerges of declining inflation. Key data and earnings reports in the week ahead will help gauge the health of the economy.

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