Market Perspective for November 5, 2023

The last few trading days were full of intensity as both a Fed interest rate decision and a nonfarm payroll (NFP) report were released. However, the first major news releases of the week came on Tuesday when the Employment Cost Index (ECI) for the previous quarter was made public and revealed that labor costs for civilian and government employers was up 1.1 percent compared to the previous three months.

This was slightly above analyst estimates of a 1 percent rise, which would have matched the 1 percent rise seen in the second quarter. Also on Tuesday, the Consumer Board (CB) issued its consumer confidence figures, which came in at 102.6 compared to a prediction of 100.5.

On Wednesday, the ISM Manufacturing PMI was released and came in at 46.7 percent, indicating a slight contraction in the manufacturing sector. Analysts had expected the report to come in at 49 percent prior to the report’s release. The Job Openings and Labor Turnover Survey (JOLTS) report also came out on Wednesday morning, and it found that there were 9.55 million open positions in the United States. This was slightly higher than the revised figure of 9.5 million openings in October.

The final report on Wednesday prior to the Fed’s rate decision was the ADP nonfarm employment change report. It found that employers added 113.000 jobs in the past month, which was well below the 149,000 figure expected prior to the release.

At 2 p.m., the Federal Open Market Committee (FOMC) issued its rate decision for November, and as most expected, rates were held steady at a range of 5.25 percent to 5.5 percent. However, Fed Chair Jerome Powell warned that rates could still go up if inflationary pressures failed to ease in a timely manner. However, most observers expect that the Fed is nearly done raising rates. It is worth noting that the Fed has come out and said that rates are unlikely to come down anytime soon.

On Thursday, it was revealed that 217,000 people filed for unemployment benefits, which was slightly higher than the 212,000 who filed last week. On its own, the release may not be cause for concern, but when taken together with data released Friday, it may foretell of an economic slowdown.

Friday morning saw the release of the NFP from the Bureau of Labor Statistics (BLS), and it revealed that 155,000 jobs had been created in the past month. It also found that the unemployment rate had ticked up to 3.9 percent while average hourly earnings ticked up .2 percent in October.

Equity markets experienced a significant amount of volatility as the various major news reports were released. For starters, the S&P 500 was up 4.62 percent this week to finish at 4,358. It would open the week at 4,165 before dipping slightly to 4,154 on Monday morning. However, it would spend the rest of the week trending higher until reaching its weekly high of 4,372 on Friday afternoon.

The Dow was up 3.68 percent to finish the week at 34,061. As with the S&P, the Dow would make its weekly low of 32,793 on Monday morning before spending the rest of the week gaining ground. On Friday, the market hit its weekly high of 34,162 before easing back to its closing price.

Finally, the Nasdaq would be the most prosperous index of the week as it gained 5.7 percent to finish at 13,478. As with the other major indices, the Nasdaq would dip slightly on Monday to reach its weekly low of 12,712 before trending higher each day after that.

After one of the most eventful trading weeks in recent memory, the upcoming week is rather sparse on major news releases. On Thursday morning, Jerome Powell is expected to speak, which always provides the potential to inject volatility into the market. On Friday morning, the University of Michigan will release its preliminary consumer sentiment and inflation expectations reports. Those who follow international markets may be interested to know that Bank of Japan (BOJ) Governor Ueda is expected to speak on Monday while interest rate decisions will be forthcoming in Australia and China.

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