US equity indexes experienced a notable upswing this week, driven primarily by robust earnings reports and sustained hopes for an interest rate cut, supported by relatively strong macroeconomic indicators. The Dow Jones Industrial Average concluded the trading week at 43,275.91, marking a significant increase from 42,863.93 the previous week.
Similarly, the Nasdaq Composite saw gains, closing at 18,489.55, up from 18,342.94 a week earlier. The S&P 500 also performed well, reading 5,864.67 at week’s end compared to 5,815.03 in the prior week. Notably, sectors such as utilities, real estate, and financials emerged as leading performers, reflecting a diverse strength across the market. The quarterly earnings of Netflix and Taiwan Semiconductor Manufacturing played a crucial role in offsetting the negative impact posed by the tepid forecast from technology giant ASML.
Additionally, financial services saw significant gains from companies like Morgan Stanley, Blackstone, and Wells Fargo, continuing the positive momentum from the previous week. On the economic front, US retail sales exceeded expectations in September, while initial jobless claims reported a decline greater than anticipated for the week ending on October 12. Analysts at Desjardins observed that the prospect of a 50 basis point cut has been ruled out for the upcoming monetary policy meetings, particularly in light of the recent job and core inflation figures from September.
They maintain an expectation for modest cuts of 25 basis points in November and December, though potential pauses could emerge in future meetings. Despite various challenges, including the aftermath of hurricanes and the ongoing strike at Boeing, recent jobless claims data suggest a labor market showing signs of cooling but avoiding collapse.
This scenario permits the Federal Reserve to proceed with a more measured approach concerning future rate cuts. By late Friday, the CME Group's FedWatch Tool indicated a 93% probability of a 25 basis-point cut at the Fed's meeting on Nov. 7. Conversely, the likelihood for maintaining the current rate stood at 7%, with no chance for a larger cut of 50 basis points. In commodity markets, West Texas Intermediate crude oil fell below the $70 per barrel threshold as reports emerged that the Biden administration is advocating for a ceasefire in Gaza, amidst heightened tensions following the assassination of Hamas leader Yahya Sinwar..