October 31, 2022

Weekly Market Commentary October 24th to October 28th 2022

In a busy week for economic data, Monday started off with the Chicago National Activity Index registering a 0.1, with a reading greater than zero indicating historical trend growth. This result was flat from the month prior and slightly ahead of forecast. Additional manufacturing and service data was released on Monday with the S&P US composite reporting its second consecutive monthly contraction at 47.3, down from 49.5 in the previous month with a reading below 50.0 as contractionary.

Tuesday brought more negative news on the housing front with pending home sales declining for a fourth consecutive month in September. Y-o-Y sales are down by 31%, while all four regions posted both M-o-M and Y-o-Y declines.
Wednesday delivered the first reading of U.S. third-quarter GDP, which bounced back to expansion with a reading of 2.6%, above the estimate of 2.4%. Consumption was positive at 1.4% but weaker than prior quarters while export and import imbalances both had a positive impact and are likely temporary drivers.

Aside from the GDP release the most anticipated economic release was inflation in the Federal Reserves preferred form of Personal Consumption Expenditures, which came in flat and at the estimate of 0.3% for the month. The Y-o-Y deflator used in GDP came in 6.2%, again flat from the prior month but slightly below the estimate and still well-above the long-term target of 2% and likely keeping the Fed on its current interest rate path.

Stocks showed continued volatility this week but ended well in the green. The S&P 500 was up 3.1% to 3,808. For the year, we are still well into the red down 18%.

The yield on the 10-Year U.S. Treasury declined throughout the week by 21 basis points to 4.01%. Meanwhile, the 2-Year U.S. Treasury dropped 6 basis points from 4.48% to 4.42%, reflecting expectations for a slower pace of Federal Reserve interest rate hikes.

Next week is loaded with economic data releases including several regional and ISM manufacturing data, as well as the non-farm payroll report for October.

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