Another Volatile Week Is On the Cards for the S&P 500 Index
The U.S. equity markets ticked
higher on Friday despite a stronger-than-expected jobs report. But
it was down for the week that ended on November 4, 2022, after the
Federal Reserve increased interest rates for the sixth time this
year. Treasury yields are at their highest levels since
In the last week, the
Dow Jones index
fell 1.4%, while the
S&P 500 index and
the Nasdaq Composite index were down by 3.3% and 5.6%,
The 10-year Treasury yield stood
at 4.2% while the two-year yield was higher at 4.7%, indicating the
inversion of the yield curve has deepened. Crude oil prices rose
and the West Texas Intermediate (WTI) crude priced at more than
$92/barrel on Friday, the highest level since August, on the news
that China could ease pandemic restrictions.
Around 80% of the companies part
of the S&P 500 have already reported Q3 earnings, so the
earnings season will cool off in the upcoming week. However,
heavyweights, including The Walt Disney
Activision Blizzard (NASDAQ:
ATVI), and Dupont (NYSE:
are scheduled to report Q3 earnings
in the next few days.
Will tech sell-offs accelerate?
Big tech companies
are under pressure. After more than
a decade of marginal interest rates, these companies are wrestling
with higher debt costs and red-hot inflation in 2022, which is
impacting both revenue and profit margins.
disclosed it would pause hiring while Lyft
reduced its employee count by 13%, and its estimated Twitter just
fired 50% of its total employees. Meta (NASDAQ: META)
is also looking to lower costs across various business segments, as
it reported two consecutive quarters of revenue decline in
Fintech start-up Stripe, which
was valued at $95 billion last March, announced it would lower its
workforce by 14%, and this trend is likely to continue in the near
Soon after COVID-19 reared its
ugly head, e-commerce and fintech companies experienced a massive
uptick in sales as several retailers moved online, accelerating the
demand for payments processing and web development services.
Companies and management overestimated the shift towards online and
expanded their employee base significantly.
But an extremely challenging
macro-environment has meant operating costs have surged amid a
slowdown in sales. The management at Shopify
SHOP) and Stripe have stated they were too optimistic about
top-line growth and “overhired for the world we’re in.”
All eyes on inflation and consumer spending
Right now, the Federal Reserve is
willing to risk the possibility of a recession to tame inflation.
In fact, the better-than-expected jobs report on Friday was frowned
upon as the labor market added 261,000 jobs in October, compared to
estimates of less than 210,000 job additions.
The Fed has emphasized interest
rates will remain elevated if inflation is not brought under
control, indicating further hikes are on the cards.
The Bureau Labor of Statistics
will release its CPI (consumer price index) report for October on
Thursday. Economists expect prices to rise 8% year over year, a tad
lower than the 8.2% gain in September. Core inflation which
excludes food and fuel costs, is expected to rise by 6.7%, higher
than the 6.6% figure for September. Any deviation from these
figures could trigger another round of sell-offs on the equity
Consumer sentiment touched an
all-time low of 50 in June as the macro environment remains
uncertain. The University of Michigan will release data for the
Consumer Sentiment Index on Friday, which is expected to touch 60,
just higher than last monthU+02019s reading of 59.9.
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