Read the 10 stories to remember from the week which ended October 23.
Story #1: The end of a three-week string of gains for U.S stocks
The major U.S stock indexes slipped around 1%, as investors reacted to stimulus negotiations while monitoring third-quarter corporate earnings reports. Small caps outperformed, as the Russell 2000 indexes managed modest gains over the week. The Nasdaq performed worst, dragged lower by weakness in Apple. Meanwhile, Communication services shares were strong, helped by gains in internet giants Facebook and Alphabet, despite Tuesday’s news that the latter had become the target of a Justice Department antitrust lawsuit.
Story #2: The earnings reporting season in full swing
Not less than 91 S&P 500 companies reported third-quarter results last week, according to Refinitiv. Netflix shares fell sharply on Wednesday, following news of subscriber gains that came in well below consensus expectations. Other notable movers included Snap, which surged on upside surprises in profits, revenues, and user growth. Conversely, shares of Intel, one of the Dow Jones Industrial Average’s 30 components, fell over 10% in early trading Friday after investors appeared disappointed by results in its data center business. Of the companies that had reported to date, however, 84% had beaten earnings estimates—the highest proportion since FactSet began tracking data in 2008.
Story #3: U.S activity data regain strength
A monthly indicator of U.S. economic activity signalled the fastest rate of expansion in 20 months for both the services and manufacturing segments of the economy. However, the survey data from the IHS Markit Purchasing Managers’ Index also showed that companies acted cautiously with coronavirus still spreading and the November 3 election creating further uncertainty. Weekly jobless claims broke a streak of negative surprises and fell more than expected to 787,000, the lowest level since March. Continuing claims also continued to fall sharply, from a revised 9.4 million to 8.4 million.
Story #4: A strong U.S Housing sector
Overall housing starts in September missed expectations, but single-family construction and overall building permits reached new 13-year highs. Existing home sales also surprised on the upside, jumping 9.4% in September to their highest level since May 2006.
Story #5: Delayed U.S fiscal package relief
It was another on-again, off-again week on prospects for further congressional aid to deal with the coronavirus’ economic impact. The uncertainty extended into Friday, when a top White House economist said talks in Congress appeared to have stalled, sparking concern that another round of aid may not be approved before the November 3 election.
Story #6: U.S Treasury Yields surged
Hopes for a near-term stimulus deal and strong U.S data lifted Treasury yields through most of the week, with the yield on the benchmark 10-year Treasury note marking its highest level (87 basis points) in more than four months. As recently as early August, the benchmark 10-year yield was as low as 0.52%. Increases in longer-term yields resulted in a meaningful steepening of the Treasury curve. The differences in yield in the two-year/10-year segment and the five-year/30-year segment reached their widest levels since summer.
Story #7: Europe's volatility on rising mobility restrictions to curb the pandemic
The week was a volatile one for European stocks. While strong earnings results from banks and automakers lifted a European index on Friday, stocks tumbled earlier in the week amid worries about the economic impact of surging coronavirus cases. Several countries tightened mobility restrictions to curb rising cases of coronavirus infections. Ireland announced a six-week full lockdown, while France extended a curfew to cover almost 70% of its population and said the state of emergency could extend until February 2021. The STOXX Europe 600 Index ended the week 1.36% lower, and major country indexes also declined. The UK’s FTSE 100 Index lost 1.00%, in part reflecting strength in the pound after the resumption of talks with the EU on post-Brexit trade ties. Meanwhile, the ECB President Christine Lagarde said in an interview with French newspaper Le Monde that the European economic recovery risked “losing momentum” as governments imposed new restrictions to curb the coronavirus pandemic.
Story #8: China's real GDP up 4.9% in Q3
Chinese stocks retreated for the week, with the large-cap CSI 300 Index and benchmark Shanghai Composite Index shedding 1.5% and 1.8%, respectively. China’s government reported that its economy grew at a 4.9% annual rate in the third quarter, extending its recovery from the pandemic. The quarterly gain for the world’s second-largest economy was faster than the 3.2% rate of increase in the second quarter, when other major economies were suffering steep GDP declines.
Story #9: Oil loses traction
U.S. crude oil prices slipped back below the $40 per barrel level, recording the first weekly decline in three weeks. Rising coronavirus cases and increasing oil output in Libya were among the factors that weighed on prices.
Story #10: Bitcoin above $13,000
News that PayPal account holders will now be able to store, buy and sell Bitcoin and other digital currencies as well as use them to buy from merchants offering PayPal as a payment method boosted the price of Bitcoin this week helped by a notion PayPal has already or will need to begin stockpiling Bitcoin and other cryptocurrencies to offer the service. The leading cryptocurrency broke the key $12,000 level in the middle of the week and then crossed the 13,000 level over the weekend. Some bullish comments by legendary hedge fund manager Paul Tudor also helped.
