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Stocks Retreat on Fears of Global Conflict, Persistent High Rates…

Dumaine Investments Weekly Market Update – October 24, 2023

• US stocks traded down over the last week amid an environment of rising long-term rates, mixed earnings results, and an escalating conflict in the Middle East. The 10-year Treasury yield almost hit 5.0% Monday before retreating to 4.9% later in the day. On the macroeconomic front, month-over-month retail sales were well ahead of consensus forecasts while new building permits were in-line with expectations.

• Economists raised their projections for US growth through early 2024 and trimmed the odds of a downturn as consumers continue to spend. The American economy likely expanded at an annualized 3.5% rate in the third quarter—the fastest in nearly two years—as forecasters increased their household spending forecasts. And while growth is expected to slow in the following two quarters, economists in the latest Bloomberg monthly survey still raised their future estimates for gross domestic product growth.

• Treasury yields retreated quickly on Monday after almost hitting the key technical level of 5.0%. Prominent bond bears said the rout had been excessive. Billionaire investor Bill Ackman wrote on Monday that he unwound his bet against US government bonds amid rising global risks, while Bill Gross, renowned co-founder of PIMCO, wrote that he is buying short-dated interest-rate futures in anticipation of a recession by year-end. Their comments coincided with a swift turnaround in yields to finish Monday’s session.

• Looking forward, there’s plenty of news in the pipeline ahead of the Fed’s next meeting on Nov 1. Official GDP data will be released Thursday while Core PCE inflation data (the Fed’s preferred inflation measure) are to be published on Friday. On the earnings front, four of the largest technology companies—the cohort that is largely responsible for stock gains this year—report this week, along with a bevy of other firms as earnings season hits high gear.

DISCLAIMER: The information provided in this blog post is for informational purposes only and should not be construed as financial advice. Investment decisions should be based on individual financial goals, risk tolerance, and consultation with a qualified financial professional.