The market in the midst of continued strength in mega-cap stocks reached intraday and closed record highs this week. The Nasdaq Composite climbed 2.7%, nearly matching the 2.9% gain in Vanguard Mega Cap Growth ETF (MGK). S&P 500 index rose 1.3%, while small-cap Russell 2000 with +0.3% and Dow Jones Industrial Average with +0.4% rose modestly.
Seven of the eleven S&P 500 market sectors closed higher, with communication services with +2.0% leading the charge and information technology with +2.0% posting followed suit. Financials, energy, utilities, and industrials closed lower with the print of -0.9%, -0.8%, -0.5%, and -0.3%, respectively.
It was a massive week for earnings. This included about one-third of the S&P 500 components, reports from Apple (AAPL), Amazon.com (AMZN), Alphabet (GOOG), Microsoft (MSFT), and Facebook (FB).
While most companies exceeded earnings per share (EPS) estimates by a wide margin, the commentary was littered with supply chain issues and higher prices. The critical point is that companies saw strong demand, increasing prices to counter inflationary pressures. These market supply chain problems are likely to continue in the fourth quarter.
This week's 0.5% drop in the Russell 1000 Value Index reflects that value stocks have been underperforming due to supply chain problems. The Advance Q3 gross domestic product (GDP) report was less than expected, and Democrats continued to delay infrastructure projects after Hunter's father announced a framework that would allow for reconciliation of the $1.75 trillion budget.
With 7% weekly gains, Microsoft and Alphabet, back to mega-caps, were this week's earnings winners. Tesla (TSLA) was the largest winner, with a 22.5% increase fueled by a deal to sell 100,000 vehicles at Hertz Global (HTZZ). TSLA achieved a market capitalization of $1 trillion.
Facebook was not famous for its earnings report, but rather because it confirmed that the company name had been changed to "Meta" and "MVRS" ticker changes. This change will take effect on Dec. 1.
Stock market(s) in the Asia-Pacific region had a mixed Friday trading session. Japan's Nikkei225 Index increased by 0.3%, while Hong Kong's Hang Seng Index fell by 0.7%.
Evergrande, a Chinese property company, avoided technical default by making an $83.5 million overdue interest payment to international bondholders. The company is not in a good place. It still has to make additional payments over the following weeks. And while it sold one asset to raise cash, the sale of a second is on hold.
China's property market is showing cracks as land sales, and new project closings are becoming more evident. September saw a drop in home prices of -0.08%. This could be the start of the third down-cycle in home prices over the last decade, just as the two previous corrections, September 2011 lasting nine months and May 2014 lasting thirteen months, bringing about weakness in industrial commodity prices.
The session saw mixed results on the major European markets. The French CAC 40 Index rose 0.4%, while the German DAX Index fell 0.1%. Meanwhile, the FTSE 100 Index in the United Kingdom dipped 0.2%.
The U.S. Treasury market was, however, quite chaotic throughout the week. The Two-year yield was two basis points higher at 0.49, whereas the Ten-year yield fell ten to close at 1.56%. The Fed's continued expectation that rates will rise sooner than expected due to inflation reflected the increase in the yield over the Two-year.
Jerome Powell, Fed Chair, yielded on the Fed's coyness, stated unambiguously, "I do think it is time to taper, I don't think it is time to raise rates." This may have been due to fears that the economy might be further hampered by a policy error, which could have fuelled the price action in longer-dated yields.
After the post-European Central Bank (ECB) rally waned quickly, the Euro Dollar finished as the worst-performing currency. It closed at 1.1561, with a loss for the week of -0.0084, as the ECB will linger behind other central banks in reducing stimulus and rising interest rates. Sterling was also affected by the Euro selloff, which saw both currencies being sold against the Swiss Franc.
As the U.S. Dollar strengthened and bond market yields firmed, gold traded lower in subdued trading. For the week is down $9, closing at $1783 as it still struggles to surpass the $1800 mark. Silver or the same period settled at $23.86, down 44¢ and struggling to stay above the $24 mark. As October closes, gold is up 1.3%, and silver is up 6%.
This Friday, Ethereum reached a new all-time high! After an incredible 24 hours, as the latest update went live, the price posted a new high of $4460 - on May 12, Ethereum last reached the stratosphere. This means the old record lasted for 171 days. Bitcoin reached a new all-time high last week and couldn't continue this momentum; however, there was an active market price action within our Buy Zone #1 & #2.
The rise in cryptos is not limited to Bitcoin and Ether. The popularity of Shiba Inu, a coin many consider a parody to the Dogecoin, also reached an all-time high thanks to a push to add the token to Robinhood's trading platform.
Is this market is a metaverse?
We live in a version of reality where one of the world's leading industrialists and richest men has bitcoin. A lot of news stories are just noise. What matters is that Elon Musk is still holding. We also live in a version of reality where a President of a country is bragging on Twitter that he bought the dip.
In this reality, we have the President of El Salvador essentially talking smack to the rest of the world as the price of bitcoin rises. Some find it funny. Others think it is misplaced excitement. And a small minority believe it could be potentially dangerous. Either way, Bukele isn't stopping his buying spree. It is hard to imagine a reality where other countries do not follow in his footsteps.