WEEKLY MARKET SUMMARY

Global Equities: US equity markets ended the week on a high note, posting record closing highs on Friday after inflation data came in cooler than expected. Despite continued volatility from the ongoing government shutdown, which is now the second longest on record, investors were encouraged by strong corporate earnings. The S&P 500 gained 1.9% for the week, the Dow Jones Industrial Average advanced 2.2%, and the Nasdaq Composite jumped 2.3%. US small cap stocks were also positive with a weekly gain of 2.5%. Developed foreign market stocks failed to keep pace with their US peers, up just 0.6% during the week, while emerging market stocks gained 1.7% on optimism that trade tensions between the US and China are cooling.

Fixed Income: Treasury yields were relatively steady during the week. The yield on the 10-Year US Treasury ended Friday at 4.02% after slipping below 4% earlier in the week. This drop was driven by expectations of a rate cut at the Federal Reserve’s October 28-29th meeting, which markets are pricing in as a certainty following the cooler-than-expected inflation report. Concerns over corporate credit defaults persisted following reports of recent bankruptcies but were counterbalanced by strong regional bank earnings.

Commodities: US West Texas Intermediate (WTI) crude oil prices ticked up during the week, ending the session around $61.50 a barrel. It was a volatile week for gold prices, which fell over 6% on Tuesday in the largest single-day percentage decline since 2013. Despite the weekly decline, gold prices are still up over 50% year-to-date.

WEEKLY ECONOMIC SUMMARY

Inflation Relief: Economists and investors have been flying blind without data during the government shutdown, so the Consumer Price Index (CPI) release on Friday was of even greater significance than usual. The CPI data was compiled by government workers who were summoned back into the office. Due to CPI’s importance in calculating the Social Security cost of living adjustment (COLA), this data release was considered essential. The data showed inflation still rising at a 3.0% annual rate, but was slightly better than expectations, which gave markets reason to rally. Encouraging data on shelter showed prices rose by just 0.2%, a welcome sign after last month’s data showed a 0.4% increase. The data should keep the Fed on track to cut rates at the upcoming policy meeting despite the lack of clarity on unemployment data, which has not been released since September.

Tariff Update: Markets got some positive news from US-China trade negotiations after US Treasury Secretary Scott Bessent walked back President Trump’s threats of 100% tariffs on Chinese goods starting November 1st. China agreed to delay its planned export controls on rare earth minerals and reached a framework agreement to resume purchases of US agricultural products. President Trump and Chinese President Xi Jinping will meet on October 30th and hopefully deliver a more concrete agreement. Things did not go so well for US-Canada relations after President Trump abruptly terminated all negotiations via a social media post, with the added threat of another 10% tariff on all Canadian goods. The outburst was triggered by a commercial from the Ontario government which contained an audio clip of former US President Ronald Reagan criticizing tariffs. The clip was authentic, but President Trump accused Canada of “cheating” and implied the quote was created by artificial intelligence in comments to reporters.

Encouraging Earnings: Third-quarter earnings continue to impress, with nearly one-third of the S&P 500 having reported and 87% of those companies announcing positive surprises. Among the week’s standouts were Ford Motors (F) which surged 12% after beating estimates, and IBM (IBM) which gained roughly 8% on enthusiasm over quantum computing research and development. Shares of Intel (INTC), which have been partially socialized by the US government after the Trump administration announced it was taking a 10% stake in the chipmaker, shot up nearly 8% on cost-cutting measures led to an earnings beat.

CHART OF THE WEEK

The Chart of the Week is a breakdown of the Core Consumer Price Index (CPI), showing the annual rate of change for Core Goods, Core Services, and Housing. This week’s data release showed that while housing costs are still rising, the rate of the increase has been gradually slowing. Unfortunately, the price increases for Services and Goods are trending in the opposite direction and are accelerating as tariff costs are being passed on to consumers. Prior to this year, goods prices were actually a net deflationary component to the CPI calculation as prices were falling, but now prices across most goods categories are increasing sharply.