Wall Street rises, boosted by upbeat quarterly earnings

Stocks rebounded sharply this week, buoyed by better-than-expected results from the biggest U.S. banks, a fall in new claims for unemployment benefits (below 300,000 last week for the first time in 19 months) as well as some data showing easing inflation pressures. The Producer Price Index for final demand increased 0.5 percent in September, seasonally adjusted. This is slower than the 0.6% rise expected. The S&P 500 rose 1.82% week-over-week while the Dow Jones Industrial Average was up 1.58%, or 549 points. The Nasdaq Composite jumped 2.18%, helped by a rally in semiconductor stocks after TSMC (Taiwan Semiconductor Manufacturing Co), the world’s largest chipmaker, notched another record quarter (share up +4.38%). Small cap stocks followed suit, though to a lesser extent (Russell 2000 up 1.46%).

Most international equity indexes also ended the week higher. The MSCI EMU gained 2.40%, the MSCI World rose 2.16%. On the other hand, APAC markets were mixed. The Shanghai Composite was down 0.55% while the NIKKEI bounced back (+3.64%), snapping a three-week losing streak.

Bulls get a wake-up call

Only one S&P sector finished in negative territory (communication services: -0.43%) as Facebook recorded a fifth week in the red (-1.60%, -14.24% since September 10). Materials stocks were the best performer over the week (+3.64%), underpinned by a 13.67% jump (dividend included) in Freeport-McMoran as copper prices continued to climb (+8.33%). Consumer discretionary was not far behind (+3.55%) thanks to Amazon (+3.66%). The same was true for real estate (+3.52%) and information technology (+2.60% with Microsoft shares up +3.17%). For the fifth week in a row, energy stocks jumped (+1.16%) in the wake of rising oil prices (WTI crude up +3.59%, notching eight straight weeks of gains!).

End of bond selloff?

The U.S. 10-year Treasury yield fell to +1.57% from +1.61% following auction results that showed strong demand for the T-note. Yet Fed members continue to be concerned about above-trend inflation, as highlighted by the minutes of the Federal Reserve's Sept. 21-22 policy meeting. Same trend in Europe with the 10-year Germany bond and the 10-year France OAT whose yields ended at -0.17% (-2bps) and +0.17% (-3bps) respectively.

Corporate investment grade bonds closed mixed (-0.06% in Europe, +0.58% in the U.S.). Ditto for high-yield bonds (-0.05% in Europe, +0.18% in the U.S.). Emerging debt (+1% in local currencies) broke its five-week losing streak.

Launch of bitcoin ETF

Elsewhere, gold edged up 0.60% (spot price at $1,767.62/Oz) in the wake of a weaker dollar index (-0.16% at 93.95). Last but not least, it is worth noting that Bitcoin hit $60,000 for the first time in six months, close to its all-time high. Traders bet that the SEC will give the green light to the first bitcoin futures ETF.

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