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WEEKLY SUMMARY: Stocks surged as inflation eases; Cryptos collapsed
US equities recorded strong gains and bond yields fell as investors celebrated reassuring inflation data. The S&P 500 recorded its best week since June and hit its best intraday level in two months. Growth stocks — tech in particular— benefited the most from falling yields. An index of nonprofitable tech stocks jumped over 15% on Thursday. The event of the week was Thursday morning’s release of the US consumer price data for October. The headline CPI rose 0.4% in October, less than consensus expectations of 0.6% and bringing the yoy increase to 7.7%, the slowest increase since January. The yoy core (less food and energy) reading fell back to 6.3% from a 40-year high of 6.6% in September. U.S. Treasury yields fell sharply in response; the 10-year U.S. Treasury note yield ended Thursday at 3.81%, down from 4.17% at the end of the previous week. Tuesday’s midterm election results and the chance that the Democratic Party might retain some control of Congress may have weighed on markets earlier in the week. The collapse of FTX drove a further decline in Bitcoin and other cryptocurrencies. In the rest of the world, the pan-European STOXX Europe 600 Index ended the week 3.66% higher. Shares in China received a late boost from the surprise drop in U.S. inflation but trailed most other global markets as investors worried about new signs of economic fragility. In Forex, the U.S. dollar had its worst week since March 2020. Gold soared to its highest level in 3 months.
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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.