Weekly Market Commentary – 11/4/2022

-Darren Leavitt, CFA

Wall Street incurred another week of losses as investors digested another 75 basis point rate hike from the Federal Reserve.  Hopes of a pivot away from a hawkish stance were diminished when Fed Chairman Powell conveyed that the Fed’s policy rate would likely be higher than previously expected and stay in place for longer.  However, the chairman acknowledged that the rate increase pace might be lower as the central bank assesses the effects on the economy of its previous rate hikes.  The odds of a 50 or 75 basis point hike at the Fed’s December meeting are about even.  Of note, the Bank of England increased its policy rate by 75 basis points, and ECB President Lagarde indicated the European block would also need to raise its policy rates to rein in inflation.  Emerging markets rallied on a Brazilian election won by Lula and on hopes that China would move away from its zero Covid policy.  Brazilian markets increased by 7.69% on the week, while large-cap Chinese issues advanced by 10.68%.

The S&P 500 lost 3.35%, the Dow fell 1.4%, the NASDAQ gave up 5.65%, and the Russell shed 2.54%. The US Treasury curve inverted further as the 2-year note yield increased by twenty-five basis points to 4.67%, and the 10-year yield increased by fifteen basis points to 4.16%.   Late in the week, a coordinated effort to intervene in the currency markets appeared in play.  The dollar, which had sat at highs, fell sharply on Friday against the Euro, Yen, Sterling, and Yuan.  Oil and copper prices surged on the notion of a “reopening” of China.  Oil prices increased by $4.75 or 5.4% to $92.64 a barrel. Copper prices rose 7.4%, closing at $3.69 a Lb.  Gold prices increased by 2$ or $33.4 to close at 1678.10 an Oz.

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