Weekly Market & Economic News Recap (Week of October 9, 2023)

• Higher bond yields likely to extend Fed rate pause. Officials are signaling that a run-up in long-term interest rates might substitute for a further central bank rate hike. (Wall Street Journal, October 10, 2023, https://www.wsj.com/economy/central-banking/higher-bond-yields-likely-to-extend-fed-rate-pause-53aa56fc?mod=economy_feat3_central-banking_pos5)

• Profits are making a comeback. Despite challenges including rising labor costs and high interest rates, U.S. corporate earnings are on an upswing. (Wall Street Journal, October 11, 2023, https://www.wsj.com/finance/stocks/profits-are-making-a-comeback-2af53ab0?mod=stocks_more_article_pos3)

• The consumer-price index highlights the risk that inflation is settling out at 3%, above the Federal Reserve’s 2% target. (Wall Street Journal, October 12, 2023, https://www.wsj.com/economy/central-banking/cpi-report-september-mild-inflation-862679f7?mod=economy_feat3_central-banking_pos2)

• The federal deficit is even bigger than it looks. Student-debt cancellation complicates the numbers as higher interest rates make borrowing costlier. (Wall Street Journal, October 12, 2023, https://www.wsj.com/economy/the-federal-deficit-is-even-bigger-than-it-looks-6bc8a070?mod=economy_more_article_pos1)

• Stock bulls embrace great yield surge in a dangerous bet on Fed. Traders wager tighter financial conditions finish Fed’s job. Yet elevated rates imperil equity earnings and capital flow. (Bloomberg, October 13, 2023, https://www.bloomberg.com/news/articles/2023-10-13/stock-bulls-embrace-great-yield-surge-in-a-dangerous-bet-on-fed?srnd=null)

• Nasdaq falls to end week after volatile session. Dow, S&P 500 book gains for the week; Treasury yields fall. (Wall Street Journal, October 13, 2023, https://www.wsj.com/finance/stocks/global-stocks-markets-dow-news-10-13-2023-e93fb394?mod=stocks_news_article_pos4)

• Fed officials prepare to extend rate pause without saying hikes are done. Policymakers are wary of declaring victory over inflation. Communication challenges grow as officials try to balance risks. (Bloomberg, October 14, 2023, https://www.bloomberg.com/news/articles/2023-10-14/federal-reserve-officials-set-to-extend-rate-pause-without-saying-hikes-are-done?srnd=economics-v2&leadSource=uverify%20wall)

• Turbulent Bond Market Offers a Fleeting Glimpse of Cycle’s End. Higher-for-longer Fed outlook was quickly reestablished. Inflation fundamentals, bond supply continue to be vexing. (Bloomberg, October 14, 2023, https://www.bloomberg.com/news/articles/2023-10-14/turbulent-bond-market-offers-a-fleeting-glimpse-of-cycle-s-end?srnd=null&leadSource=uverify%20wall)

• War adds risks to indebted, expensive and fractured world. World economy facing record debt, high rates, dysfunction. Financial, policy leaders gather around IMF/World Bank meeting. (Bloomberg, October 15, 2023, https://www.bloomberg.com/news/articles/2023-10-15/war-adds-risks-to-indebted-expensive-and-fractured-world?srnd=economics-v2&leadSource=uverify%20wall)

• Big Tech’s profit machine is propping up S&P 500 earnings. Five tech giants expected to show 34% profit growth on average. Tech-related earnings announcements kick off this week. (Bloomberg, October 15, 2023, https://www.bloomberg.com/news/articles/2023-10-15/big-tech-s-profit-machine-is-propping-up-s-p-500-earnings?srnd=markets-vp)