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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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U.S. stocks declined during the week, although a rally on Friday helped major indexes recover some of their lost ground. Losses were broad-based, though smaller-cap indexes generally fared worst. The Fed’s rate cut announcement on Wednesday (25bps) was largely expected. However, sentiment turned negative as investors digested hawkish forecasts and commentary from Fed officials regarding the path forward for interest rates. The hawkish tone helped drive the S&P 500 Index lower by nearly 3% for the day, its second-worst day of the year. Political uncertainty in the form of a looming government shutdown also seemed to rattle investor confidence. In economic news, the U.S. Real GDP grew 3.1% in Q3, outpacing a previous estimate of 2.8%, partially owing to increases in consumer spending.