Market Perspective for October 3, 2022

It was another depressing and down week for the major stock market indexes.

On Friday, the Dow Jones Industrial Average dropped 500.10 points or 1.71 percent, finishing at 28,725.52, closing under 29,900 for the first time since November 2020. The Nasdaq Composite dropped 1.51 percent, and the S&P 500 lost 1.51 percent, dropping to 3,585.62.

For the week, it was red across all major market averages. The Dow lost 2.9 percent, the S&P 500 fell 2.9 percent, and the Nasdaq Composite was down 2.7 percent.

Friday was the last day of the third quarter and typical of the entire month. For September, the Dow fell 8.8 percent, the S&P 500 lost 9.3 percent, and the Nasdaq tumbled 10.5 percent.

The S&P 500 index finished its worst month since March 2020, at the start of the pandemic and lockdowns. For the year, the Dow Jones Industrial Average is down 20.9 percent, and the Nasdaq Composite has tumbled 32.4 percent.

The Dow Jones Industrial Average with the S&P 500 and Nasdaq are all three in bear market territory. The Dow has declined more than 20 percent from its level in early January.

With rising interest rates, it has not been a good year for the bond market either. Bonds were down 1.0 percent last week, closing at $96.26, down 14.1 percent for the year.

Last week was a volatile week in the bond market, especially for the 10-year U.S. Treasury. The yield on the 10-year Treasury surged Tuesday to as high as 3.99 percent, its highest level in 14 years. During the next day’s trading session, the 10-year dropped to 3.71 percent, finally closing at 3.829 percent on Friday.

Adding to the down markets was a downgrade of Apple stock. Bank of America analyst Wamsi Mohan dropped their rating to a neutral from a buy. Apple shares fell nearly 5 percent, dragging dow

Mohan cited several risks with Apple stock, including a weaker buying cycle associated with the Apple iPhone 14, which Apple released last month. The day before, it was reported that Apple had dropped its plan to boost Apple iPhone production by 6 million units in the second half of 2022.

The Apple downgrade also took other tech stocks with it. Microsoft saw the smallest blow to its stock, which closed down about 1.5 percent, reaching a 52-week low. The parent company, Alphabet dropped 2.6 percent, also reaching a 52-week low. The Facebook parent company, Meta Platforms fell 3.7 percent, Amazon was off 2.7 percent, and Tesla tumbled 6.8 percent

Personal income increased 0.3 percent, as expected. Spending went up 0.4 percent after showing a decline of 0.2 percent in July. Inflation appears to be broadening with headline inflation, which includes food and energy, also sped up, despite a sharp drop in gasoline prices.

When the Federal Reserve started its fight against inflation, Federal Reserve Chairman Jerome Powell said that he wanted to cool off the housing market, and the labor market to help fight inflation. So far, the housing market has cooled very slightly, but rents remain high. Both go into the shelter category and are counted heavily in the consumer price index (CPI).

Last week, the initial filings for unemployment claims came in hotter than expected, which is not what the Federal Reserve wants to see. The initial unemployment claims fell to their lowest level n five months. Jobless claims totaled 193,000, down from 16,000 from the previous weekly report, below the estimated 215,000.

This week’s upcoming economic reports include:

  • Tuesday: Factory orders
  • Wednesday: ADP National Employment Report
  • Thursday: Weekly unemployment claims
  • Friday: Jobs and unemployment
  • Friday: Wholesale investories
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