Market Watch: October 2022

November 3, 2022

The Markets (as of market close October 31, 2022)

We’re cautiously noting October saw stocks close higher, the first monthly gain since July.

Investors were encouraged by hopes that the Federal Reserve will pull back from its aggressive interest-rate hike policy. In addition, solid third-quarter earnings could be a sign that the economy can withstand the battle to lower inflation. Each of the benchmark indexes listed here posted notable gains, led by the Dow, which rose nearly 14.0%. The Russell 2000 gained about 11.0%, followed by the Global Dow, the S&P 500, and the Nasdaq.

After two consecutive quarters of retractions, the economy expanded at an annualized rate of 2.6% in the third quarter. Personal spending, which accounts for nearly 70% of the economy, increased 1.4% in the third quarter. A strong labor market and ample savings have supported consumer spending. The Treasury deficit for fiscal year 2022 was nearly half the total of the previous fiscal year. Industrial production increased, as did new orders for durable goods. However, not all economic indicators were positive. The housing sector continued to lag, impacted by rising mortgage interest rates. Inflation indicators, which had shown a decline in August, reversed course in September. The personal consumption expenditures price index and the consumer price index increased.

Crude oil prices notched their first monthly gain since June, following the largest cut in output by OPEC since the pandemic, further straining global supplies. Crude oil prices settled at around $86.10 per barrel, up over 8.0% from August. Gas prices, which had fallen during the summer months, reversed course somewhat in October. The national average retail price for regular gasoline was $3.769 per gallon on October 24, up from $3.569 on September 26 and $0.386 higher than a year ago.

Bond prices fell in October, pushing yields higher. Ten-year Treasury yields climbed 27 basis points, likely in anticipation of a continuation of the Fed's aggressive monetary policy. The dollar slid lower against a basket of world currencies. Gold prices fell in October, the seventh consecutive month of declining prices.

Looking Ahead

The Federal Open Market Committee meeting during the first week of November will likely see another 75-basis point interest rate increase, although there is some discussion among the Committee to slow the pace of increases moving forward. However, the latest data showed inflation rose, which may influence the Fed to continue its aggressive policies.

Data sources: Broadridge Investor Communication Solutions, Inc.

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