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John Hancock: Weekly Market Recap Week Ended October 27

October 31, 2023

 

Upside GDP surprise

The U.S. economy remains resilient despite fears of a recession, as GDP expanded at a 4.9% annual rate in the third quarter, above consensus expectations for around 4.7%. Consumer spending stayed strong, and the latest result marked an acceleration from the second quarter’s 2.1% pace.

 

Shrinking margins

Approaching the midpoint of earnings season, companies in the S&P 500 were on track to record an overall decline in their profit margins for the seventh quarter in a row. The average net profit margin was 11.6%, versus 11.9% in the same quarter a year earlier, according to FactSet data released on Tuesday. Margins peaked at 13.0% in the second quarter of 2021.

 

Flattened yield curve

In the wake of recent bond market volatility, government bonds were relatively stable, with yields of 2-year, 10-year, and 30-year bonds all declining slightly for the week. Yields for each maturity remained roughly around 5.00%, indicating a flattening of the yield curve, which has been inverted since July 2022, when the 2-year yield began to exceed that of the 10-year Treasury.

 

Busy week

In addition to more quarterly earnings reports, the new week will bring a U.S. Federal Reserve policy meeting that concludes on Wednesday and a monthly jobs report on Friday. The Fed is widely expected to keep interest rates unchanged; the jobs report will show how October’s jobs growth compared with September’s bigger-than-expected surge of 336,000 jobs.

 

Source: https://www.jhinvestments.com/weekly-market-recap

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