Last Week
There was an early snowstorm in Chicago and tough sledding on Wall Street, as many of the hot sectors slipped on the ice. The Nasdaq Composite slid 3%, and Bitcoin tumbled 6.9%, while a 10% spike in the VIX, or the “Fear Index,” further suggested a risk-off mood on Wall Street. The market internals were not too bad, with declining issues only modestly outnumbering advancing issues and half the industry sectors finishing in the green. Nevertheless, the S&P 500 and Russell 2000 shed 1.6% and 1.8%, respectively. The yield on the 10-year Treasury held steady at 4.1%, with the Dollar modestly lower and Gold slightly higher.
Dysfunction in the nation’s capital and soft economic data weakened the bull case for stocks, despite strong corporate earnings and prospects for lower interest rates. The sell-off followed weeks of record highs and light data flow amid the prolonged government shutdown. The non-government data releases were discouraging, with Challenger, Gray, and Christmas data showing that layoffs spiked in October, while the University of Michigan Sentiment Survey recorded a plunge in consumers’ view of current economic conditions. On the other hand, corporate earnings continued to exceed expectations, with S&P 500 third-quarter earnings now on pace to grow 13% for the quarter, up from 9% at the end of September, fueled by explosive growth from the Tech sector. In other news, the Supreme Court appeared skeptical of President Trump’s tariffs, which could provide relief for companies and consumers, but also punch a hole in the government’s budget. The election results during the week highlighted voters’ dissatisfaction with the current economic policies.
On the Chicago Sports Scene: It was a snowy, blustery day at Soldier Field on Sunday as the Bears rallied from 10 points down to beat the Giants in a 24-20 thriller. The schedule gets tougher from here, but it is all smiles at Halas Hall after back-to-back dramatic wins (albeit versus weak competition). The Bulls have dropped three of their last four games but are still playing hard and sharing the ball.
This Week
Earnings season will wrap up with just 11 S&P 500 companies reporting results. The economic calendar is bare because of the government shutdown. The negotiations to end the shutdown will be closely watched as concerns mount over the impact on fourth-quarter GDP and the potential for Thanksgiving travel disruptions. Fortunately, the markets got a lift Monday morning on optimism that lawmakers were moving closer to a funding bill to reopen the government.
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