by Mariann Montagne, CFA
All data is for the week ended November 3, 2023
Stocks
Stocks rallied globally after the Federal Reserve kept interest rates unchanged. The benchmark S&P 500 gained 5.88%, the Russell 2000 marched ahead by 7.59% and the Nasdaq advanced 6.62%. Overseas, the developed market index (MSCI EAFE) rose 4.43% while the emerging markets index (MSCI EEM) gained 3.13%. Small caps outperformed mid- and large-cap stocks. Gains occurred across all of the US sectors. Real estate and financials were the best performers while energy and consumer staples were the laggards.1
Fixed Income
Interest rates fell and bond values rose following the Federal Reserve’s meeting mid-week in which they agreed to keep interest rates unchanged. The Fed announced that pressures on labor costs appear to be in check, reducing pressure for further hikes to curb inflation. The Fed also stated, “longer-term inflation expectations appear to remain well anchored, as reflected in a broad range of surveys.”2 Likewise, the Eurozone central bankers met and unanimously agreed to stop raising interest rates for the first time in 15 months following a steep drop in inflation for their area.3 The benchmark 10-year treasury yield fell 27 basis points to end the week at 4.57%.4
Commodities
The price of cobalt has dropped 35.7% year to date.5 Demand for cobalt has decreased with falling electric vehicle sales in Europe and China, and as battery production shifts to cheaper, cobalt-free materials. With the lifting of export restrictions from the largest producer earlier this year, the combination of excess inventory and reduced demand has driven prices down.6
Economic Data
Total nonfarm payroll employment increased by 150,000 in October, below the consensus expectation of 179,000. Also, employment in the months of August and September combined was lowered by 101,000. The unemployment rate edged up slightly to 3.9%. Wages in the last year increased by 4.1% in October, lower than the 4.3% rate seen in September.7 Friday’s report confirmed the Federal Reserve’s mid-week view that labor supply and demand is becoming more balanced and less inflationary. Home prices for the major 20 metropolitan regions rose 1.0% on the month in August, beating the consensus estimate for a 0.7% gain. The unadjusted annual rate rose to 2.2% percent from July’s growth of 0.2%. Shortages of homes available for sale are driving prices higher despite nearly 8% mortgage rates on a 30-year loan. Leading cities were Chicago, New York and Detroit while the worst performers were Las Vegas and Phoenix.8
Company News9
Advanced Micro Devices Inc. (AMD), a Core Select and G33 holding, reported last week and beat on revenue and earnings. Management’s forward guidance was in line with consensus expectations. Data center demand and artificial intelligence (AI) continue to be the primary growth drivers.10 Shares of the semi-conductor company rose 16.41% for the week.
Apple Inc. (AAPL), a Core Select and G33 holding, reported revenue and earnings that exceeded consensus expectations. Management guided the current quarter’s results to be flat on a year-over-year basis, which is below expectations.11 They were more conservative regarding the holiday selling season than some investors had hoped. Shares rose 5.01% for the week.
Starbucks Corp. (SBUX), a G50 holding, reported both revenue and earnings that were stronger than consensus expectations. Same store sales were up 8% driven by US demand for higher priced drinks.12 Shares rose 11.55% for the week.
Did you know…
When super-heated (beyond the point of vaporization) one drop of water expands 2500 times. Super-heated steam will ignite a match.
Mariann Montagne, CFA
Portfolio Management Consultant
Sources:
1 JP Morgan Weekly Market Recap 11-6-23
2 Federal Reserve FOMC Report 11-1-23
3 Financial Times, “Is This the Turning Point For Interest Rates?” 11-3-23
6 Oilprice.com, “Cobalt Unexpected Plunge Shocks Global Market “ 10-30-23
7 Bureau of Labor Statistics 11-3-23
8 CME Group: CoreLogic Case-Shiller 10-31-23
9 All weekly changes in company stock prices: Yahoo Finance
10 Advanced Micro Devices press release 10-31-23