Economy
- U.S. equities lost ground during the week ending November 4 amid investor concern regarding the Federal Reserve’s (Fed) monetary policy. The Federal Open Market Committee (FOMC) implemented another 0.75% increase in the federal funds rate to a range of 3.75%-4.00%, which will result in higher borrowing costs for consumers and businesses. In a statement issued following its meeting, the FOMC noted that it is “strongly committed to returning inflation to its 2.0% objective”.
- Although the FOMC’s action was widely-expected, there was a selloff in the U.S. equity market following Fed Chair Jerome Powell’s comments at a news conference after the announcement of the rate hike. Powell affirmed, “Restoring price stability will likely require maintaining a restrictive stance of monetary policy for some time”. He also acknowledged that “at some point, it will become appropriate to slow the pace of increases, as we approach the level of interest rates that will be sufficiently restrictive to bring inflation down to our 2.0% goal”.
- The U.S. employment situation remained robust in October. The Department of Labor reported that U.S. payrolls expanded by a larger-than-expected total of 261,000 in October. The unemployment rate ticked up 0.2% to 3.7% as the labor force participation rate (the percentage of the population age 16 and over who are employed or actively seeking employment) dipped 0.1% to 62.2%. The health care, professional and technical services, and leisure and hospitality sectors saw the largest job gains for the month. Average hourly earnings rose 0.4% and 4.7% in October and over the previous 12-month period, respectively.
- The labor market was jolted on Tuesday by the Department of Labor’s Job Openings and Labor Turnover Survey (JOLTS). The number of job openings in the U.S. rose by 437,000 to 10.7 million in September (the most recent reporting period), rebounding from a sharp month-over-month decrease in August. The notable rise in job openings suggests that employers are having difficulty filling vacant positons and may need to increase wages in an already inflationary environment. Stocks declined following the release of the survey, as investors worried that it would lead the Fed to raise interest rates for a longer period of time. The job openings rate (which is calculated by dividing the number of job openings by the sum of the total number of employees and the number of job openings) ticked up 0.2% to 6.5%, indicating continued strength in the labor market, but remained below its peak of 7.3% in March of 2022.
Stocks
- U.S. equities were in negative territory. Energy and materials were the top performers, while telecommunications and consumer discretionary lagged. Value stocks led growth stocks and small caps beat large caps.
- Global equities closed lower for the week. Emerging markets fared better than developed markets.
Bonds
- The 10-year Treasury bond yield increased to 4.17% during the week.
- Global bond markets were in negative territory this week.
- Global corporate bonds led, followed by global government bonds and high yield bonds.
