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Weekly Market Brief: October 30, 2023

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Week in Review

The S&P 500 index fell by more than 2% last week, bringing the total decline to more than 10% since stock prices peaked in late July. The Dow Jones Industrial Average is now solidly in negative territory for the year, and even the NASDAQ Composite’s 20% gain looks modest compared to the near-40% mark set earlier this year. Interest rates stabilized during the week after the 10 Year Treasury yield briefly touched 5%, and the US Dollar Index continued to mark time as it has since the end of September. Gold gained more than 1% for the third straight week, but Bitcoin stole the show when it jumped by nearly 20% and reached its highest level in more than a year.

Preliminary data indicated that third quarter economic activity was strong, and the first estimate of GDP lived up to the hype. The economy grew at a 4.9% annualized rate in 3Q 2023, among the best prints over the last 20 years.

At this week’s FOMC meeting, Jerome Powell & Co. will have to decide whether the economic acceleration is consistent with their price stability mandate. Almost no one believes they’ll raise rates on Wednesday (futures markets are pricing in a 0.0% chance as of this writing), but the post-meeting press conference could give us additional clues as to how Fed members see the path of rates in 2024. Or not. After their meeting last week, European Central Bank head Christine Lagarde stressed that now is not the time to be giving forward guidance, given the uncertainty of the outlook.

Relatively Speaking

Every single S&P 500 sector fell over the last month, paced by a 8.4% drop in the price of Energy stocks. The underperformance of cyclical sectors was a common theme: Financials, Industrials, and Consumer Discretionary each dropped 5%. Meanwhile, risk-off sectors like Consumer Staples and Utilities managed to outperform modestly.

Growth sectors are still in the pole position year-to-date, with Communication Services (+33.6%), Information Technology (31.4%), and Consumer Discretionary (17.7%) each on pace for banner performances. The gains aren’t widespread, though. Investing in any other sector has yielded a negative return for the year, well below the S&P 500’s 7.2% gain.

What’s Ahead

Here are the key data releases and events to keep on eye on in the coming days.