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Inflation and rate worries weighed on US equity large-caps indices as earnings season begins. The technology-heavy Nasdaq Composite recorded its third consecutive weekly loss. Financials shares came under pressure on Friday as JPMorgan Chase and Citigroup reported lower profits in the fourth quarter. Energy shares outperformed as oil prices continued their climb back to late-October highs. Shares in Europe pulled back on signals that the U.S. Federal Reserve would tighten monetary policy at a faster rate than the market had previously expected. Chinese markets fell for the week; the CSI 300 Index retreated 2%, weighed by headlines about refinancing difficulties in the country’s troubled property sector. In Fixed Income, US 10-year bond yield hit 1.8% on Monday but ended the week at around 1.78%. Yields were mixed this week with the long-end outperforming (managing to end the week very marginally lower), while the short-end was smashed 10bps higher. Rate-hike odds surged with the market now implying a 75% chance of a 4th rate-hike by the end of the year. Cryptos had another choppy week but ended higher with BTC and ETH up around 3% on the week.
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Most of US equities indices rose to record highs, as investors wagered that a “red sweep” (Republicans winning Presidency, Senate and Congress) would result in faster earnings growth, looser regulations, and lower corporate taxes. The small-cap Russell 2000 Index surged 8.57% for the week but was the sole benchmark to remain out of record territory. Meanwhile, the Dow Jones hit 44.000 for the first time while the S&P 500 closed just shy of 6,000, up 4.7% for the week, its best weekly gain in almost a year. On Thursday, the Fed announced a 25bps rate cut, its first easing move since cutting rates by 50 basis points in mid-September. In terms of economic data, the October ISM services sector activity came in at 56.0, well above expectations and the best reading since August 2022. U.S. Treasuries generated positive returns heading into Friday, as yields largely ended lower than where they ended the previous week.