Mid-Week Market Minute 11.08.23

Stocks Push Higher on Third-Quarter Earnings, Interest Rates News

Stocks continued to move higher this week as the S&P 500 notched its eighth consecutive day of positive returns on Tuesday – the longest winning streak since 2021. This recent rally comes on the heels of relatively strong third-quarter earnings results and lower interest rates. More than 80% of S&P 500 companies have reported results, and earnings are on pace to grow by nearly 4% on a year-over-year basis. 

Meanwhile, interest rates have backed off their recent highs, reflecting the markets belief the Federal Reserve may be done hiking rates. After hovering around 5% in late October, the yield on the 10-year US Treasury note now is trading around 4.57%. Futures markets currently are pricing the odds of an additional rate hike by the end of January at just 15% but are pricing in about a 20% chance that rate cuts could begin as early as March. Recently, Fed officials have pushed back against the notion that the “higher for longer” narrative has ended. With Federal Reserve Chair Jerome Powell and other officials scheduled to speak twice this week (Wednesday and Thursday), investors will continue to look for clues into the future path of Fed policy. 

On the data front, investors will look to initial and continuing jobless claims data on Thursday for further clarity into the labor market. Last Friday’s jobs reflected a strong but slowing labor market in the U.S., with a welcomed decline in average hourly earnings. Looking forward to next week, markets will be focused on CPI and Core CPI inflation due on Tuesday. Expectations are for headline CPI to show a significant decline from September, on the heels of lower energy prices. Meanwhile, the more widely followed Core CPI is expected to remain unchanged for October.

Source: GSAM, CNBC, JPMorgan

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