Market Update 10/24/22

Mark Amstislavskiy

Strong corporate earnings results pushed major indexes up from Oct. 18 through Oct. 24.

On Tuesday, announcements from Goldman Sachs Group Inc., Lockheed Martin Corp. and Netflix Inc. pushed the three major indexes up. The Dow Jones Industrial Average and S&P 500 both rose 1.1%, while the Nasdaq composite notched up 0.9%.

“Earnings are yet to crack,” Altaf Kassam — the head of investment strategy for Europe, the Middle East and Africa for State Street Global Advisors — told The Wall Street Journal. “Consumers seem surprisingly resilient, and it feels like companies are kind of keeping their heads above water.”

The yield on 10-year Treasuries ticked down to 3.996% from 4.012%. Bond yields remain astronomically high, which could influence stock prices as high-yield bonds become an increasingly attractive investment.

Wednesday saw a turnaround, with the Dow ticking down 0.3%, Nasdaq falling 0.9%, and S&P 500 falling 0.7%.

While the favorable earnings reports provide some reassurance to investors, the documents also suggested consumer spending remains high and further rate increases are on the horizon. Inflation numbers from the United Kingdom and Canada were also higher than expected, reinforcing the need for global central banks to continue tightening monetary policy.

“At the moment, we keep getting upside surprises on inflation everywhere you look,” Hugh Gimber — a strategist for JPMorgan Chase & Co.’s asset management division — told The Wall Street Journal.

The decline continued into Thursday, with the Dow, the Nasdaq and the S&P 500 losing 0.3%, 0.6% and 0.8%, respectively. While strong earnings reports reflect corporate and consumer resilience, concerns and uncertainty regarding future interest rate movements remain the main priority for investors.

On Friday, tides turned as Federal Reserve officials announced that although they intend on another 75-basis-point increase at the next meeting, smaller increases are a likely possibility for successive meetings. The news pushed the major indexes up, with the Dow up 2.5%, Nasdaq up 2.3% and S&P 500 up 2.4%.

“I think we’re in the final innings of Fed hawkishness,” Christian Hoffman — a portfolio manager at Thornburg Investment Management — told The Wall Street Journal.

By the week’s close, yields on 10-year Treasuries settled at 4.212%, one of its highest levels in the past 10 years. Major indexes all ended in the green, gaining over 4.6% each.

By Monday, futures markets priced in a 50-basis-point increase for the Fed’s December meeting. Stocks continued to rally as the Dow, the Nasdaq and the S&P 500 ended the day up 1.3%, 0.9% and 1.2%, respectively.

The recent uptick reflects optimism surrounding the resilience of corporate earnings and the potential slowdown of rate increases. Investors will look to upcoming earnings reports from companies such as Apple Inc., Inc. and The Coca-Cola Co. to continue analyzing the effects of tightening monetary policy.