Aviso Weekly Market Pulse: October 30th – November 3rd

Nov 6, 2023

Market developments

Equities:
Stocks rallied, indicating that the Federal Reserve’s stance of no further rate hikes and potential rate cuts as early as June resonated with investors. The S&P 500 gained around 5.9%, with the VIX (volatility index) experiencing its largest five-day decrease in 21 months. Despite the recent stock market rebound, concerns persist regarding the profit outlook for Corporate America. Companies providing guidance for the next quarter and beyond have frequently given estimates that fall short of analysts’ expectations. A gauge of forward guidance, comparing corporate forecasts with Wall Street consensus, is at its lowest level since 2019, based on data from Bloomberg Intelligence.

Fixed income:
Traders have reduced the likelihood of another rate hike by January to just 20% and have fully priced in the possibility of a rate cut by June instead of July. This change in sentiment followed weaker data, including the slowest growth in the U.S. service sector in five months, moderated job growth, and an increase in the unemployment rate to 3.9%. Wage growth also slowed. This led to a drop in yields this week and the U.S. 10yr fell 26bps to 4.57% and the Canadian 10yr closed 24bps lower.

Commodities:
Oil prices are experiencing their second weekly loss as the risk premium linked to geopolitical tensions in the Middle East has dissipated. Signs of soft demand are becoming more prominent. Soft U.S. jobs data and a weaker dollar have contributed to this trend, making crude more affordable for importers. Additionally, rising U.S. oil stockpiles and factory activity contraction in China, a major crude importer, have added to concerns.

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