STOCK MARKETS TURN IN A MOSTLY SOLID WEEK ALTHOUGH SMALLER CAPS DON’T SEEM TO BE PARTICIPATING IN THE MINI-RALLIES

Weekly Market Update — November 11, 2023

• Stock markets had a pretty solid week, except for small-caps, which stumbled as the Russell 2000 declined 3.1%
• The tech-laden NASDAQ (+2.4) was the weekly winner, although the large-cap S&P 500 (+1.3%) and the mega-cap DJIA (+0.7%) had solid weeks too
• Six of the 11 S&P 500 sectors advanced this week, led by Information Technology (+4.8%) and Communication Services (+2.2%), as was the case last week too
• And of the declining sectors, once again Energy (-3.8%) was the worst performer, but Utilities (-2.6%) and Real Estate (-2.1%) struggled too
• The 2-year Treasury moved up 19 basis points this week to close at 5.05% while the 10-year Treasury advanced this week to 4.63%
• It was another big week of earnings and generally speaking, earnings came in stronger than anticipated
• There were also quite a few speeches from Fed officials this week and most of them carried a more dovish tone, although there was some healthy debate about Fed Chair Jerome Powell’s remarks when he said “If it becomes appropriate to tighten policy further, we will not hesitate to do so”
• WTC Crude dropped almost 5% this week and ended at $77.35/barrel, fairly close to where it started the year

*Source: Bonds represented by the Bloomberg Barclays US Aggregate Bond TR USD. This chart is for illustrative purposes only and does not represent the performance of any specific security. Past performance cannot guarantee future results.

Stock Markets Advance Again Except for Small Caps

It was a mostly positive week for stocks, except for small-caps which retreated more than 3% and are down about that much for the YTD. In terms of better news, on Wednesday the S&P 500 was very close to matching its longest winning streak in nearly 20 years as it recorded its 8th straight gain. NASDAQ, not to be outdone, recorded its 9th straight gain.

It was also another big week of earnings reports and generally speaking, earnings surprised on the upside. This was especially true from the big tech firms and seemed to pull markets along (except for small-caps). And according to research firm FactSet, with 92% of S&P 500 companies reporting:

• 81% of S&P 500 companies have reported a positive EPS surprise and 61% of S&P 500 companies have reported a positive revenue surprise.
• For Q3 2023, the blended (year-over-year) earnings growth rate for the S&P 500 is 4.1%. If 4.1% is the actual growth rate for the quarter, it will mark the first quarter of year-over-year earnings growth reported by the index since Q3 2022.
• Nine sectors are reporting higher earnings today compared to September 30 due to positive EPS surprises and upward revisions to EPS estimates.
• For Q4 2023, 59 S&P 500 companies have issued negative EPS guidance and 30 S&P 500 companies have issued positive EPS guidance.
• The forward 12-month P/E ratio for the S&P 500 is 18.0. This P/E ratio is below the 5-year average (18.7) but above the 10-year average (17.5).

From a sector standpoint, most of them advanced, with Information Technology once again leading the pack. And the almost 5% drop in WTC Crude prices pushed the Energy sector to once again hold the title for worst weekly sector performance.

Economic Data Received This Week

• The final reading for the University of Michigan Consumer Sentiment Index for October came in at 63.8, down from September’s final reading of 67.9.
• In the same period a year ago, the index stood at 59.9.

• The Current Economic Conditions Index rose to 70.6 from 66.7 in the preliminary reading. The final September reading was 71.4.
• The Index of Consumer Expectations fell to 59.3 from 60.7 in the preliminary reading. The final September reading was 66.0.
• Year-ahead inflation expectations accelerated to 4.2% from 3.8% in the preliminary reading and 3.2% in September.
• Five-year inflation expectations remained at 3.0% seen in the preliminary reading, which was up from 2.8% in September.

• Initial jobless claims for the week ending November 4 decreased by 3,000 to 217,000.
• Continuing jobless claims for the week ending October 28 increased by 22,000 to 1.834 million.
• The four-week moving average for initial claims increased by 1,500 to 212,250.
• The four-week moving average for continuing claims increased by 32,250 to 1,789,000.
• The total number of continued weeks claimed for benefits in all programs for the week ending October 21 was 1,599,616, an increase of 1,962 from the previous week.
• In the same week a year ago, there were 1,263,105 weekly claims filed for benefits in all programs.

• The trade deficit widened to $61.5 billion in September from a downwardly revised $58.7 billion in August.
• Exports were $5.7 billion more than August exports while imports were $8.6 billion more than August imports.

• Exports of supplies and materials increased $1.4 billion.
• Exports of foods, feeds, and beverages increased $1.4 billion.
• Imports of consumer goods rose $2.0 billion, led by a $1.8 billion increase in cell phones and household goods.
• Imports of automotive vehicles, parts, and engines increased $1.9 billion.
• Imports of capital goods increased $1.6 billion.
• The real goods deficit increased $2.8 billion to $86.5 billion.
• That left the Q3 average 4.5% below the Q2 average.

• Consumer credit increased by $9.0 billion in September after decreasing a downwardly revised $15.8 billion in August.
• Revolving credit increased by $3.1 billion in September to $1.288 trillion.
• Nonrevolving credit increased by $6.0 billion to $3.689 trillion.
• Consumer credit increased at a seasonally adjusted annual rate of 2.2% in September.
• Revolving credit increased at an annual rate of 8.6%.
• Nonrevolving credit decreased at an annual rate of 2.4%.

bea.gov; federalreserve.org umich.edu ; factset.com ; msci.com; fidelity.com; nasdaq.com; wsj.com; morningstar.com;