Week in Review: October 28, 2022

Markets ended the week higher in anticipation that the Federal Reserve will announce (or at least telegraph) plans to be less aggressive with future rate hikes following its upcoming November meeting. A busy week for earnings reports and economic data also kept investors busy. Interest rates pulled back on Fed-related expectations, with the 10-Year Treasury falling 0.21% to end at 4.02%.

Emerging markets were the notable laggard, weighed down by Chinese stocks. President Xi Jinping secured an unprecedented third term and named many of his loyalists to key positions. There is concern that China will continue to pursue its Zero-Covid policies and possibly intensify its crackdown on various sectors, including the tech industry, despite the economic impact.

Economic activity (GDP) expanded 2.6% in 3Q, following a 0.6% decline in 2Q. Despite the relative strength of the headline number, underlying details pointed to further slowing. Consumer spending declined from 2.0% to 1.4% as spending on goods fell for a third consecutive quarter. Spending on services remained positive but slowed from 4.6% to 2.8%. Business spending fell for a second quarter, impacted by a 26% decline in housing, which shaved 1.4% off headline GDP growth. In a bit of an anomaly, trade was the most significant contributor to growth, adding 2.8%, its largest absolute contribution since at least 4Q18.

Through Friday, 52% of S&P 500 companies had reported earnings. Thus far, 71% have beaten their earnings estimate. According to industry group FactSet, 3Q22 aggregate S&P 500 earnings growth is expected to be 2.2%.