Weekly Recap | October 23, 2023

October 16-20, 2023 Recap

As Yields Surge, Equities Retreat

Uncertainties Weigh on Investors
Stocks fell on a variety of news last week. On the top of investors’ minds was perhaps geopolitical risks in the Middle East, but closer to home rising bond yields were a concern as well. Federal Reserve members spoke a lot last week about higher-for-longer interest rates and the economic data also seemed to support that idea. Retail sales came in better than expected, as did jobless claims. While third quarter earnings have been relatively weak, they have also exceeded expectations.

For the Week…
The S&P 500 sank 2.38%, the Dow Jones Industrial Average lost 1.57%, while the tech-heavy Nasdaq Composite tanked 3.16%. Small cap stocks slightly beat large cap stocks with the Russell 2000 slipping 2.25%. While internationally, the MSCI EAFE and MSCI Emerging Markets Index fell 2.59% and 2.70%, respectively.

Earnings Beat Low Expectations
Although still early, initial third quarter earnings reports so far show 80% of S&P 500 companies are topping analysts’ consensus forecasts. In aggregate, estimates for overall S&P 500 firms are holding pre-season EPS growth forecasts for 1.6%.

Weekly Sector Insights
Nine of the 11 S&P 500 sectors posted losses last week, with Consumer Staples (+0.83%) and Energy (+0.71%) being the lone gainers. Real Estate (-4.63%), Consumer Discretionary (-4.45%) and Information Technology (-3.13%) led to the downside.

Treasury Yields Spike
With better-than-expected economic data and the Federal Reserve saying rates will be higher for longer, bond investors are demanding more yield, sending bond prices lower. The 10-year Treasury yield went from 4.63% at the start of the week to almost touching 5%, before ending the week at 4.93%.

The Latest from @CeteraIM

Home Sales 13-Year Low

Housing Starts Tick Up

Retail Sales Surprise

Economic Calendar

Monday, October 23
No Major Releases.

Tuesday, October 24
S&P Case-Shiller Home Prices, S&P U.S. Services/Manufacturing PMIs (preliminary).

Wednesday, October 25
Mortgage Activity, New Home Sales.

Thursday, October 26
Jobless Claims, Initial 3Q GDP, Durable Goods Orders, Goods-only Trade Balance, Business Inventories, Pending Home Sales.

Friday, October 27
Personal Incomes/Spending, PCE Index, Consumer Sentiment.

While the S&P 500 is up 11.47% year-to-date, it has been driven higher by large companies that make up a significant portion of the index. If we weight all the companies in the index equally, the index is down -1.55% this year. The top 10 holdings of the S&P 500 now make up nearly 33% of the index, the highest since 2002.

^{This report is created by Cetera Investment Management LLC. For more insights and information from the team, follow @CeteraIM on Twitter.}

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^Glossary

^{The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ.} 

^{The S&P 500 is an index of 500 stocks chosen for market size, liquidity and industry grouping (among other factors) designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe.} 

^{The NASDAQ Composite Index includes all domestic and international based common type stocks listed on The NASDAQ Stock Market. The NASDAQ Composite Index is a broad based index.} 

^{The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe and is a subset of the Russell 3000 Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership.} 

^{The Russell 3000 Index measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market.} 

^{The Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity universe and is a subset of the Russell 1000 Index. It includes approximately 800 of the smallest securities based on a combination of their market cap and current index membership.} 

^{The Bloomberg US Aggregate Bond Index, which was originally called the Lehman Aggregate Bond Index, is a broad based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government–related and corporate debt securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS and CMBS (agency and non-agency) debt securities that are rated at least Baa3 by Moody’s and BBB- by S&P. Taxable municipals, including Build America bonds and a small amount of foreign bonds traded in U.S. markets are also included. Eligible bonds must have at least one year until final maturity, but in practice the index holdings have a fluctuating average life of around 8.25 years.} 

^{The Bloomberg US Corporate High Yield Index measures the USD-denominated, non-investment grade, fixed-rate, taxable corporate bond market. Securities are classified as high yield if the middle rating of Moody's, Fitch, and S&P is Ba1/BB+/BB+ or below, excluding emerging market debt. Payment-in-kind and bonds with predetermined step-up coupon provisions are also included. Eligible securities must have at least one year until final maturity, but in practice the index holdings has a fluctuating average life of around 6.3 years.} 

^{The Bloomberg US Municipal Bond Index covers the USD-denominated long-term tax exempt bond market. The index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds, and prerefunded bonds. Eligible securities must be rated investment grade (Baa3/BBB- or higher) by Moody’s and S&P and have at least one year until final maturity.} 

^{The MSCI EAFE Index is designed to measure the equity market performance of developed markets (Europe, Australasia, Far East) excluding the U.S. and Canada. The Index is market-capitalization weighted.} 

^{The MSCI Emerging Markets Index is designed to measure equity market performance in global emerging markets. It is a float-adjusted market capitalization index.} 

^{The Bloomberg Commodity Index is a broadly diversified index that measures 22 exchange-traded futures on physical commodities in five groups (energy, agriculture, industrial metals, precious metals, and livestock), which are weighted to account for economic significance and market liquidity. No single commodity can comprise less than 2% or more than 15% of the index; and no group can represent more than 33% of the index.}

 ^{The S&P GSCI Crude Oil Index is a sub-index of the S&P GSCI, provides investors with a reliable and publicly available benchmark for investment performance in the crude oil market.}

 ^{The S&P GSCI Gold Index, a sub-index of the S&P GSCI, provides investors with a reliable and publicly available benchmark tracking the COMEX gold futures market.}

^{The U.S. Dollar Index is a weighted geometric mean that provides a value measure of the United States dollar relative to a basket of major foreign currencies. The index, often carrying a USDX or DXY moniker, started in March 1973, beginning with a value of the U.S. Dollar Index at 100.000.}