-Darren Leavitt, CFA

This week, the debt market resumed its sell-off and wreaked havoc on the equity markets. The US 10-year bond yield hit 5% for the first time since 2007, while longer-tenured issues felt the brunt of the sell-off. The move came despite increased tensions in the Middle East, where Israel plans a ground campaign into Gaza. Currently, it appears Israel is allowing more time to negotiate the return of hostages before entering Gaza. However, US Treasuries that found a safe-haven bid in the prior week due to the geopolitical uncertainties- found no such cover this week. The US Congress continued to be caught up in trying to elect a new Speaker. Jim Jordan, a Representative from Ohio, could not secure the votes in three attempts.

Investors also heard hawkish tones from several Fed Officials who seemed content with the sell-off in the bond market. Mixed third-quarter earnings results featured Netflix, which soared after better-than-expected subscriber growth. Tesla fell short of expectations but reaffirmed its year’s production goals. Regional Banks sold off on concerns over higher rates, and airlines sold off on higher fuel and labor cost projections.

The S&P 500 fell 2.4%, the Dow sank 1.6%, the NASDAQ shed 3.2%, and the Russell 2000 lost 2.3%. OF note, the S&P 500 closed below its 200-day moving average after failing to regain its 50-day moving average. The 2-year yield climbed by four basis points to 5.09%, while the 10-year yield increased by twenty-nine basis points to close at 4.92%. Oil prices closed the week up a fraction at $88.05 a barrel. Gold prices increased by 2.7% or $52.80 to $1994.30 an Oz. Copper prices were unchanged on the week at $3.56 a Lb. The US Dollar index fell 0.5% to 106.16 as Bitcoin traded north of $30,000.

Economic news showed a resilient consumer as Retail Sales figures beat expectations. The headline number came in at 0.7% versus expectations of 0.5%. The Ex-Auto figure increased by 0.6% versus the consensus estimate of 0.3%. The buoyant consumer must take solace in the strong labor market that showed only 198k in Initial Claims this week- the lowest figure since January. Continuing claims increased by 29k to 1734k. Existing home sales came in at 3.96 million, slightly better than expected but the lowest since October 2010. Housing Starts came in at 1358k, and Building Permits were somewhat better at 1473k. Economic Leading Indicators showed a negative reading for the 18th month. This coming week, investors will be focused on the Fed’s preferred measure of Inflation, the PCE, which will be announced on Friday.

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