by Mariann Montagne, CFA
All data is for the week ended October 27 , 2023
Stocks
US stocks slid last week following disappointing quarter reports from the communications technology sector, which has expanded to over 30% of the S&P 500 benchmark. Meanwhile continuing concerns about inflation and the resulting outlook for interest rates pressured stock valuations lower. From their recent highs, both the S&P 500 and the Nasdaq have corrected to a 10% decline. Last week the S&P declined 2.52%, the Nasdaq dropped 2.62% and the Russell 2000 lost 2.60%. International markets, where high tech is less dominant, held up better than US markets, with the developed markets index (MSCI EAFE) down 0.76% while the emerging markets index (MSCI EEM) declined 0.61%. 1
Fixed Income
Interest rates declined slightly as we approached this week’s Federal Reserve interest rate decision, one that is widely expected to hold rates steady. The 10-year treasury benchmark interest rate declined 9 basis points for the week to 4.84%.2 Also next week, the Bank of Japan and the Bank of England will meet; expectations are they will also hold their official rates steady.
Commodities
Gold (GLDM), a Precious Metals and Endowment Series holding, continued to rise, reaching $2,002.10 per troy ounce on Friday and nearing its May high of $2,060.30.3 Gold has been on the rise as investors sought refuge from the potential fallout of the Israel-Hamas war that escalated in early October.4
Economic Data
Economic growth in the last quarter accelerated to a real annualized rate of 4.9% – the fastest pace in two years. Surprising was a summer splurge— particularly by affluent households – driving private consumption to 4% growth for the quarter. Inventory accumulation (usually a volatile section) was the second largest contributor, as automakers stockpiled vehicles in anticipation of widespread strikes.5
Company News6
Amazon.com Inc. (AMZN), a Contrarian Choice, Core Select and G33 holding, is a beneficiary of the transition to cloud-based computing and increasing usage of artificial intelligence. Quarterly revenue and earnings were ahead of expectations, and management guided to a reacceleration in results in the coming quarters.7 Shares rose 2.1% for the week.
Chevron Corp. (CVX), a Core Select, Energy and G50 holding, agreed to buy fellow oil company Hess Corp. (HES) in an all-stock deal valued at $60 billion when including debt.8 In a week in which the energy sector stock market was particularly under pressure, shares of CVX dropped 13.5%.
Microsoft Corp. (MSFT), a Core Select and G33 holding, reported revenue and earnings that beat expectations driven by the reaccelerated strength of Azure, their cloud computing business. Also, management provided guidance for the current quarter which was generally above consensus estimates.9 Shares rose 1.0% for the week.
Morgan Stanley (MS), a Core Select and G50 holding, after a lengthy process, selected Ted Pick to be their next CEO starting in January. He will succeed James Gorman, who has run Morgan Stanley for 14 years; he will now transition to the role of Executive Chairman.10 Shares declined 3.7% for the week.
Did you know…
The ugly witches scene in Shakespeare’s “Macbeth” describes a caldron that contains of “eye of newt and toe of frog, wool of bat and tongue of dog…like a hell-broth boil and bubble.” Eye of newt is actually just an archaic term for mustard seed.
Mariann Montagne, CFA
Portfolio Manager
Sources:
1 JP Morgan Weekly Market Recap 10-30-23
3 Apmex
4 Reuters, “Gold Set for Third Weekly Gain” 10-27-23
5 Bureau of Economic Analysis 10-26-23
6 All weekly changes in company stock prices: Yahoo Finance
7 Amazon.com press release 10-26-23
8 Chevron press release 10-23-23