John Hancock: Weekly Market Recap Week Ended November 11th
Although U.S. inflation remains near its highest level since the early 1980s, the latest monthly Consumer Price Index report brought some relief. Inflation rose at an annual 7.7% rate in October—down from 8.2% in September—and 0.4% on a month-to-month basis. Both figures were below the levels that most economists had expected.
Bond price rebound
The new inflation numbers fueled speculation that the U.S. Federal Reserve could begin to scale back the size of interest-rate increases starting in December, sending bond prices higher and yields lower. The yield of the 10-year U.S. Treasury bond tumbled from 4.16% at the end of the previous week to 3.82% on Thursday. (On Friday, U.S. bond markets were closed for the Veterans Day holiday.)
Diminished earnings outlook
With the current quarterly earnings season nearly complete, analysts have recently been scaling back their expectations for fourth-quarter results that will be released starting in January. On average, analysts expect fourth-quarter earnings for S&P 500 companies to decline by around 1.0%, according to FactSet. At the end of September, analysts had forecast earnings to rise 3.9%.
Retail data ahead
A U.S. retail sales report scheduled to be released on Wednesday will show whether a recent sales slump extended into October. In September, retail sales posted a flat 0.0% result, down from the prior month’s 0.4% gain. Since retail sales figures aren’t adjusted for inflation, September’s result suggested that consumers cut their spending in response to rising prices.