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The Dow Jones is up 4 straight weeks (+14%) - its biggest 4-week gain since April 2020. Meanwhile, the Nasdaq is 'only' up 5% on the month. Indeed, stocks rose this week but offered widely divergent returns, as investors reacted to contrasted Q3 earnings reports. Energy and industrial stocks handily outperformed growth shares, with the latter weighed down by steep declines in several mega-cap tech stocks, including Microsoft, Amazon.com, Alphabet and especially Meta Platforms (parent of Facebook), following earnings misses and lowered outlooks. The Cboe Volatility Index (VIX) fell below its 50-day moving average on Wednesday—only the 4th time that has happened since February. Hopes that the Federal Reserve might slow its pace of rate increases seemed to be a driver of positive sentiment during the week. Stocks rose after the Bank of Canada’s unexpected decision on Wednesday to raise rates by only 0.50% instead of the 0.75% widely anticipated, leading to hopes that the Fed might follow its example. S&P U.S. manufacturing activity fell into contraction territory but US GDP expanded at 2.6%, above estimates of 2.4%. In Europe, the ECB hiked rates by 75bps but hinted increases may slow as recession looms. STOXX Europe 600 Index ended the week 3.7% higher. China stocks tumbled on Monday following Communist Party's 20th Congress where Xi Jinping tightened its grip on power. US 10-year Treasury yield ended the week at roughly 4.00%.
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Most US equities indexes ended the week lower, although the tech-heavy Nasdaq Composite advanced modestly and cleared the 20,000 mark for the first time. The Russell 2000 Index recorded a second consecutive week of underperformance against the S&P 500 Index. Growth stocks posted a third consecutive week of outperformance versus value, thanks in part to gains in shares of Tesla (12%) and Alphabet (8.4%). On the macro-economic side, stagflation fears started to rise once again. Indeed, YoY CPI and PPI both accelerated. Meanwhile overall macro surprises disappointed for the fourth week in a row: on Thursday, the Labor Department reported a surprise jump in weekly initial jobless claims to a two-month high of 242,000.