A good week for the bulls

October ended on a positive note. Wall Street hit new highs as corporate earnings continued to surprise to the upside. The S&P 500 rose 1.33% week-over-week (closing price of 4,605.38), the Nasdaq rallied 2.71% to a close at a record of 15,498.39. The Dow Jones hit an all-time high of 35,819.56 (+0.40%). U.S. stock markets were driven by a climb in Microsoft (+7.26%) and Google-Alphabet (+6.96%) thanks to stellar results as well as a Tesla-powered rally in consumer discretionary (sector up 3.98%). The electric-automobile manufacturer saw its stock surging by more than 22% over the week as its Model 3 became Europe’s best-selling car in September, outsolding established brands for the first time. Tesla’s market cap is now higher than $1.1 trillion.

European and APAC markets were mixed. The MSCI EMU was up 0.89%. The Shanghai Composite dipped 0.98% on weak Chinese data while the Nikkei edged up 0.30%. Japan’s PM Kishida defied expectations in Sunday’s general election, winning an absolute majority with his Liberal Democratic party that raises hopes for more stimulus and stability.

Communication services bounce back

Ranked just behind the best performer of the week (consumer discretionary), communication services jumped 2.04%, ending a seven-week losing streak despite Facebook’s persistent weakness (-0.32%, eighth negative week) in the wake of disclosures made to the SEC and provided to Congress by whistleblower Frances Haugen. Amid controversy, the world's biggest social network has been renamed “Meta” to reflect what CEO Mark Zuckerberg calls “metaverse”, i.e. a shared virtual environment that is supposed to be the successor to the mobile internet.

Health care (+1.62%) and information technology (+1.97%) stocks were also among the top performers of the week. By contrast, financials were dragged lower (-0.90%) by falling bank stocks as Treasury yields slipped. Energy also turned lower (-0.77%) after a six-week winning streak as oil prices were pressured (-0.23%) by data showing a larger than expected build in the U.S. weekly crude stockpiles.

The U.S. yield curve flattens

The 10-year U.S. notes yields dropped to +1.55%, compared with a five-month peak of 1.66% touched last week. Yet the Federal Reserve is expected to announce tapering of its bond purchase at its next policy meeting. In Europe, the 10-year Germany bond yield remained virtually unchanged (-0.11%) while that of France rose to +0.27%.

Corporate investment grade bonds closed mixed (-0.11% in Europe, +0.31% in the U.S.). On the other hand, high-yield bonds edged up +0.08% in Europe and +0.05% in the U.S.

Emerging debt was hurt (-0.63% in local currencies) by a stronger dollar (dollar index up 0.56%).

Elsewhere, gold lost momentum (-0.57%, spot price at $1,782.37/Oz).

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