Market Pulse

In focus

Equities were unable to maintain the previous week's momentum on the heels of the S&P 500’s fourth weekly gain of at least 5% this year. Notably, the energy sector underperformed for the second-consecutive week as oil prices fell sharply. Hawkish comments from Federal Reserve (Fed) officials, paired with strong retail sales data, poured a bit of cold water on hopes of a lower terminal Fed Funds rate, which investors had been pricing in after last week’s better-than-expected Consumer Price Index (CPI) data.

Investors got an encouraging sign on inflation for the second-straight week on Tuesday, as the October Producer Price Index (PPI) came in below expectations. Equity markets responded favorably, with all major U.S. indices ending the day in the green. On the other hand, the Leading Economic Index declined for the eighth-straight month, showing continued risks to the U.S. economy.

Conversely, retail sales rose more than expected, showing the resilience of U.S. consumers. This was reinforced by decent earnings releases from some notable retailers. Heading into a holiday-shortened week, policymakers and investors alike will grapple with these conflicting indications of consumer resiliency and a weakening economy. 

A look back

• Global stocks dropped slightly, while U.S. equities fell 0.7%, underperforming global markets. Emerging markets were positive.
• The 2-/10-year inversion intensified, closing Friday at the steepest inversion (-0.69%) since 1981. The 3-month/10-year inversion also reached levels not seen in over 20 years.
• Mortgage rates plunged but remain highly elevated. The average 30-year fixed rate dropped 0.57% to 6.61%.

A look ahead

• Investors will parse limited economic data and minutes from the November FOMC meeting for clues on the Fed’s policy path.
• This week will be shortened by the Thanksgiving holiday, with U.S. markets closed on Thursday and closing early Friday.
• Economic releases: Univ. of Michigan Sentiment, FOMC meeting minutes, S&P Global U.S. Manufacturing & Services, New Home Sales, Durable Goods Orders.

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