(CercleFinance.com) – A ‘100% green’ week is coming to an end: 5 consecutive sessions of increases and strong scores ranging from +5.2% to +7.5% ‘weekly’.
The good series continues with the Dow Jones which recovers +0.66% (+5.2% weekly), the S&P500 +0.94% (+6.1% weekly), the Nasdaq +1.38% (+ 6.6% weekly) in the wake of Nvidia +3.5%, AMD +4.1%, Illumina +4.2%, Airbnb +6.2%, Sirius +6.5%.
The Russell-2000 largely outperforms the other indices with +2.7% (and +7.5% over the past week) after having fallen so far behind since January 1: the extent of the increase since Wednesday reflects buybacks – sometimes panic- from short sellers.
In addition to ‘small and mid-caps’, the 2 major winning sectors of this week of easing of rates are individual home builders and banks with +10.9% and +11% respectively.
The big losers are the pharmaceutical sector and the oil companies with a new decline this Friday in Marathon -3.2%, Conoco, Valero -2%, Hess -1.5 (the ‘WTI’, down -2.4% , ends the week at the lowest at $80.5).
Defensive values were abandoned while the speech of leader Hassan Nasrallah who once again had very harsh words for Israel did not call for the outbreak of a war, even distancing himself from Hamas with which the leader of Hezbollah denies any complicity.
The markets’ fear was that a new front would open on Lebanon’s southern border, leading the USA and Israel to attack Iran.
Investors are therefore approaching the weekend with confidence, without mentioning a new ‘weekend of all dangers’ and remain on the good impression created by the spectacular recovery of the bond markets in 3 sessions following the ‘dovish’ inflections of Jerome Powell’s speech.
The relaxation which extends over the 9 sessions (and especially the last 3) stands out as the opposite – or the exact symmetry – of the last bullish segment from October 12 to 23.
For T-Bonds, the ’10 year’ ended -13Pts towards 4.545% (i.e. -40Pts compared to last Friday) and a floor was even recorded at 4.4810%, i.e. -54Pts compared to the annual zenith.
The ’30 years’ fell -7Pts below 4.74% against 5.05% on October 31 and recorded a low of 4.685%.
The most spectacular difference goes to the ‘2 years’ which suddenly erased -17 points to 4.83% this Friday and recorded its best close since August 9.
Everything accelerated with the sinking of the 4.93% level at precisely 1:30 p.m.: the relaxation was very sudden and had an amplitude of -15Pts in 1/4 hour.
It coincided to the exact second with the publication of the employment report in the United States: the American economy generated only 150,000 non-agricultural jobs in the month of October, according to the Department of Labor, a lower number than market expectations (180,000).
‘Employment gains were recorded in health care, administration and social assistance, while employment declined in the manufacturing sector due to strikes,’ explains the Labor Department.
The unemployment rate increased by 0.1 point to 3.9% of the active population and the labor force participation rate stood at 62.7%; average hourly income increased at an annual rate of 4.1%.
In addition, job creations for the previous two months were revised downward, from 227,000 to 165,000 for August and from 336,000 to 297,000 for September, for a total revision balance of -101,000 for these two months.
The speakers then discovered the ISM services index, also much lower than expected: it fell to 51.8, after having stood at 53.6 in September, while economists expected a more limited decline towards 53.
The new orders component improved to 55.5 from 51.8 the previous month, while the employment subindex fell to 50.2 from 53.4 in September.
The component measuring activity decreased to 54.1 compared to 58.8 the month before.
The upward dynamic in yields is in the process of reversing downward on T-Bonds while the FED’s ‘pivot’ is now anticipated from June 2024 and no longer September 2024.
The Dollar is feeling this with a fall of -1% this Friday and -1.7% over the week: the Dollar-Index ends exactly on the threshold of 105, the lowest of the week and since September 13 .
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