Weekly Market Insights – Monday, November 6, 2023

Stocks Rally Following Fed Decision and Cooling Labor Market:

Stocks saw a remarkable surge last week as bond yields retreated dramatically. This sudden decline can be attributed to the alleviation of inflationary pressures and indications of a potential labor market slowdown.
Over the last month, The Dow Jones Industrial Average returned 1.74%, while the S&P 500 returned 1.10%. The Nasdaq Composite Index returned 0.56%.

Source: Charles Schwab & Co, Inc.

Stocks Rise

Stocks jumped higher right from the start of the week, shaking off the prior week’s sell-off. The combination on Wednesday of the Fed’s decision to keep rates unchanged, which accompanied dovish comments from Fed Chair Powell, and a reassuring Treasury announcement on future bond sales, sparked a third straight day of gains. Slight employment gains and weak manufacturing data provided an additional impetus.
The rally continued on Thursday following a sharp drop in bond yields that was driven, in part, by substantial productivity gains and decelerating wage growth. When Friday’s monthly employment report was lighter than forecast, yields pulled back further, and stocks added to their week’s gains.

Signs of Labor Cooling

Last week’s employment data showed potential for a cooling labor market after many months of confounding economists’ expectations. The first sign was a lower-than-expected growth in new private sector jobs in October, as reported by Automated Data Processing (ADP), which showed a gain of 113,000 new jobs versus a forecast of 130,000, while job openings were little changed.1
Initial and continuing jobless claims also rose, exceeding consensus estimates. On Friday, the government’s monthly employment report further confirmed a potentially cooling employment picture, showing an October slowdown in hiring (150,000 new jobs versus September’s revised gain of 297,000) and an uptick in the unemployment rate to 3.9%.2

This Week: Key Economic Data

Source: Bloomberg Finance L.P.

This Week: Companies Reporting Earnings

Source: EarningsWhispers

At Concord Asset Management, we design portfolios for the long run, with the ability to navigate various market cycles. However, you can have confidence that we are monitoring these market-moving events, and we will make reasonable, tactical adjustments as necessary.

Author

Gary Aiken
Chief Investment Officer
Concord Asset Management

Footnotes and Sources

1CNBC, November 2, 2023
2The Wall Street Journal, November 3, 2023

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