Stocks Register Weekly Loss (despite Friday’s gain) – Monday Morning Market Memo – November 7, 2022

Stocks Register Weekly Loss (despite Friday’s gain) – Monday Morning Market Memo – November 7, 2022

The major stock market averages all posted gains of over 1% on Friday (with the Dow advancing over 400 points), in what was very volatile trading after the release of the October Jobs Report.  The United States Department of Labor reported the economy added 261,000 jobs last month, versus consensus expectations for an increase of 205,000.  Additionally, job gains for the prior two months were revised higher by 29,000.  However, the unemployment rate rose to 3.7% and wage growth slowed a bit – so investors and the market were divided on how to interpret the data, and its ramifications – resulting in the choppy trading on Friday.

Despite the market ending with a nice gain on Friday after digesting the employment data, all three major indices posted weekly losses – the Dow Jones Industrial Average dropped 1.4% to 32,403 – the NASDAQ Composite shed 5.6% to 10,475 – while the Standard & Poor’s 500 Index fell 3.3% to 3,771.

Markets were focused on the Federal Reserve last week, which, in-line with expectations, raised interest rates .75 percent.  What came as a surprise to many though, and soured market sentiment (especially in the technology sector) was some of the commentary by the central bank.  Chair Powell stated, “it is very premature to be thinking about pausing (interest rate increases)” and “the ultimate level of interest rates will be higher than previously expected.”  So, the higher for longer message, was made clear to the markets, and weighed on equity prices.

The Federal Reserve’s next policy meeting/statement is on December 14th, with probabilities at 52% the Fed will hike interest rates by ½ percentage point, according to the CME Fedwatch Tool.  Impacting the path of future hikes, the most impactful and widely watched economic number out in the week ahead is October’s Consumer Price Index, scheduled to be released on Thursday.  Forecasts are the report, released by the Bureau of Labor Statistics, will show a year-over-year increase of 8%.  The core CPI (which excludes food and energy prices) is expected to be up 6.5%.

The inflation numbers are widely watched by the Federal Reserve, and the Fed will also have data on November’s inflation level before their December meeting.  Currently, the Federal Reserve and monetary policy is a key driver of the market, and we expect that to be the case for a while longer.  Remember, investing is a marathon, not a sprint.  During the investing/economic marathon you will see plenty of economic (and Fed) cycles.  We are advocates for time in the market, rather than timing the market – and we advise staying the course that is right for you – considering such things as your goals and objectives, risk-tolerance, risk-capacity, and cash flow needs.

As always, please contact us with any questions you may have, or if you would like to set up a meeting.

All the best – Southport Station Financial Management, LLC