The Long and Short of it, week ending 06 Oct 2023
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A somewhat mixed week for major stock indexes. The Nasdaq Composite Index performed the best, gaining over 1.5%, followed by the S&P 500 Index, up ½ percent and trailed by the Dow Jones Industrial Average, down about 1/3 percent. The dominant theme last week was sharply higher Treasury rates and there deleterious effect on economic growth, corporate profits and stock prices in general. Tuesday’s significantly stronger-than-expected JOLTS report was the main impetus for higher rates. 10-year Treasury rates rose 11bps Tuesday after rising a like amount Monday. Stock prices, reacting to higher rates, fell sharply Tuesday with all 3 major indexes recording losses greater than 1%. Sentiment, however, reversed Wednesday, with stock prices regaining a good portion of their losses after a much weaker-than-expected ADP payroll report. Markets waffled through Thursday in front of Friday’s payroll report and then, interestingly, noticeably rallied (and Treasury rates fell) despite a much stronger than-expected jobs report, possibly because wage growth as reported in the report continued to soften and came in below expectations as well. For the week, the S&P 500 Index increased 0.5% to 4,308.50, the Nasdaq Composite Index rose 1.6% to 13,431.34, the Dow Jones Industrial Average decreased 0.3% to 33,40758, the 10-year U.S. Treasury rate rose 23bps to 4.81% and the U.S. dollar (as measured by the ICE U.S. Dollar index – DXY) weakened 0.1%.
European stock markets fared worse than their U.S. counterparts, ending the week lower. Both the STOXX 600 and FTSE 100 Indexes lost over 1% last week, suffering from a combination of higher rates (as in the U.S.) and weak economic data (particularly in the euro zone with sharply declining manufacturing activity). Falling prices in UK chain stores, while positive from an inflation perspective, increased slow growth/recession concerns as did beleaguered luxury stock performance. Both the STOXX 600 and FTSE 100 Indexes moved lower through Wednesday, falling south of 2%, but then partially recovered Thursday and Friday, ostensibly on a rallying U.S. market but also on falling rates. For the week, the FTSE 100 Index decreased 1.5% to 7,494.58, the STOXX 600 Index fell 1.2% to 444.92, the 10-year Gilt rate rose 13bps to 4.58%, the 10-year Bund rate rose 5bps to 2.89%, the British pound and the euro appreciated 0.3% and 0.2%, respectively, both versus the U.S. dollar.
Top performing ETPs over the week
| . | 3x Long ETPs | 3x Short ETPs | ||
|---|---|---|---|---|
| UK | +3x Royal Dutch Shell (3LRD) | -1.3% | -3x Roll-Royce (3SRR) | +28.6% |
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The Long and Short of it, week ending 06 Oct 2023
