Major U.S. indexes closed the action-packed week with losses, as Friday’s rebound wasn’t enough to offset Thursday’s sea of red. The S&P 500 (SPX) dropped by 1.37% on the week, while the Dow Jones Industrial Average (DJIA) declined by 0.15%. Meanwhile, the tech benchmarks Nasdaq Composite (NDAQ) and Nasdaq-100 (NDX) fell by 1.50% and 1.57%, respectively.
On Thursday, the S&P 500 fell more than 1.5% as the market reacted to Meta Platforms’ (META) and Microsoft’s (MSFT) earnings. Even though the tech giants reported much better-than-expected results, the market’s reaction was influenced by concerns over increased spending and a more conservative outlook on AI growth from both companies.
Halloween’s tech-driven plunge on Thursday was also driven by the latest Core PCE report, which cast a shadow on the Fed’s rate-cut outlook. The Federal Reserve’s preferred inflation measure posted its biggest monthly gain since April. However, Friday’s weak job market report helped maintain the expectations of another interest-rate decrease at the central bank’s policy meeting this week. Traders now unanimously expect a 0.25% rate cut.
The U.S. economy added just 12,000 jobs in October, well below the already-low estimates of 115,000, posting the worst job-gain result since its December 2020 decline. However, the outcome was strongly impacted by back-to-back hurricanes and a strike at Boeing, making the job report more noisy than useful. Still, given that the actual job growth from the past two months ended up being lowered by 112,000 from previous estimates, the latest numbers fit the trend of deceleration in the labor market.
The report showing that U.S. manufacturing contracted more than expected underscored the sizable blow that high interest rates delivered to the economy, particularly to the more capital-intensive sectors. The preliminary Q3 GDP growth also came in lower than was anticipated by economists. While the annual economic growth rate of 2.8% is still exceptionally strong, it was less than the 3% the market was expecting, and also represented a slowdown from Q2’s 3% expansion. A solid, but weakening economy suggests further gradual pace of policy rate cuts.
Three Economic Events
Beyond the U.S. presidential elections and the Federal Reserve’s policy meeting – both happening this week – there are still several important data points expected to draw investor attention.
Here are three economic events that could affect your portfolio this week. For a full listing of additional economic events, check out the TipRanks Economic Calendar.
» October’s ISM Services PMI – Tuesday, 11/05 – This report shows business conditions in the U.S. services sector, which contributes over 70% of the U.S. GDP. PMI indices are leading economic indicators used by economists and analysts to gain timely insights into changing economic conditions. The direction and rate of change in the PMIs usually precede changes in the overall economy.
» Q3 2023 Non-Farm Productivity and Unit Labor Costs (preliminary readings) – Thursday, 11/07 – The Productivity report measures output per hour of labor. Since higher labor productivity leads to healthier business activity, i.e., higher economic growth, the report helps discern both near- and long-term GDP growth trends. The Unit Labor Costs report reflects the price of a unit of production in terms of wages and helps uncover inflationary or disinflationary pressures coming from wages.
» November’s Michigan Consumer Sentiment Index and UoM 5-year Consumer Inflation Expectations (preliminary readings) – Friday, 11/08 – These reports portray the results of a monthly survey of consumer confidence levels and consumer views of long-term inflation in the United States. The level of confidence affects consumer spending, which contributes about 70% of the U.S. GDP. The inflation expectations index is used as a component of the Fed’s Index of Inflation Expectations calculations.
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