This week, U.S. equity indexes experienced a decline influenced by mixed earnings from major technology firms and surging government bond yields. Investors were assessing inflation figures and nonfarm payroll data ahead of the upcoming presidential elections. The Dow Jones Industrial Average finished at 42,052.19 on Friday, a slight decrease from 42,114.40 last week.
The S&P 500 ended at 5,728.80, down from 5,808.12 the previous week. Meanwhile, the Nasdaq Composite closed at 18,239.92, a drop from 18,518.61 last week. In the reporting of major tech companies, Meta Platforms ($META), Apple ($AAPL), and Microsoft ($MSFT) saw declines by the end of the week. In contrast, Amazon.com ($AMZN) and Alphabet ($GOOGL) managed to achieve share-price increases. On Thursday, data indicated a 0.2% sequential rise in the personal consumption expenditures price index for September, aligning with expectations.
However, this figure reflected a reduction in the year-over-year rate to 2.1%, down from 2.3% in August. The price index had previously increased by 0.1% month over month in August. The core PCE price index also rose as anticipated, increasing by 0.3% compared to a 0.2% gain in August. The year-over-year rate for the core index remained stable at 2.7%. On Friday, reports revealed that nonfarm payrolls had increased by only 12,000 in October, significantly below the consensus estimate of 100,000 compiled by Bloomberg.
This figure marks the weakest growth since December 2020. Additionally, revisions showed downward adjustments of 31,000 for September and 81,000 for August. This jobs report positions the Federal Reserve on a path to potentially lower its target rate by 25 basis points, bringing it down to a range of 4.5% to 4.75% at its upcoming meeting on November 7.
Insights from Oxford Economics noted that the FedWatch Tool indicated a 33% likelihood that interest rates could settle between 3.75% and 4% by July, suggesting a cautious approach to rate reductions moving forward. Furthermore, the two-year Treasury yield climbed to 4.21%, up from 4.11% a week ago.
The ten-year yield surged to 4.38%, rising from 4.24%, as bond investors reacted to the uncertainties linked to the presidential elections and economic data..