Weekly Market Update

Author : Rachel Poole
Date : November 19, 2022

Global Market News

Global Equities Stumble

Global equities were slightly down on the week. The S&P 500 and Dow Jones declined 0.69% and 0.01% respectively, while the Nasdaq dropped 1.57%. The yield on the US 10-year Treasury was barely up on the week, closing at 3.83% after falling last week. The price of a barrel of West Texas Intermediate crude oil decreased nearly 10% to $80.08 as demand worries rise. Volatility, as measured by the CBOE Volatility Index, closed the week at 23.12.

Consumer debt, mortgage rates, and Treasury inversion

A series of important US economic data hit the press this week. First, US consumer debt sharply rose 8.3% year over year in the third quarter to $16.5 trillion. This is the largest jump seen since the first quarter of 2008. Most of the increase is attributed to mortgage debt, however, credit card balances rose 15% from last year. Second, the average 30-year US mortgage rate declined to 6.61% from 7.08%, marking its largest weekly drop since 1981. The decline was largely due to falling US treasury yields this week following a softer-than-expected inflation reading. Speaking of treasuries, the yield on the US treasury note traded 70 basis points below the 2-year on Friday which is the deepest inversion since the recession of the 1980s. The inversion has heightened fears of a US recession in the coming months.

Updated Market Figures

International Developments

COP27 continues into overtime

This year’s United Nations climate conference (COP27) in Egypt will extend at least one day past the original deadline as delegates work to reach an agreement on a European Union (EU) proposal that aims to resolve a deadlock over financing for countries hit by climate-fueled disasters. Donor countries are also reportedly finalizing the details of an $11 billion deal for Vietnam to abandon coal. According to reports from Bloomberg, a draft communique from the conference has fallen short of strengthening language on phasing our fossil fuels but discussions continue.

North Korean missile lands in sea off of Japan

As the US, Australia, Canada, Japan, and New Zealand gathered for the Asia-Pacific Cooperation conference in Thailand this week, North Korea launched two intercontinental ballistic missiles (ICBM) in the sea off of Japan. Japan reported the ICBMs had a potential range to reach the US mainland, suggesting Pyongyang has the capability to launch a nuclear attack on American cities. The leaders of the conference condemned North Korea’s actions, with the US calling the tests a “brazen” violation of UN resolutions. The aggressive acceleration of missile tests by North Korea in recent months has heightened concerns that North Korea would take military action against South Korea and is developing their nuclear arsenal.

US Social & Political Developments

Nancy Pelosi steps down as Democrat party leader

After the Republicans regained control of the House of Representatives this week, House Speaker Nancy Pelosi announced she will step down as the Democratic Party’s leader. Pelosi announced her resignation by declaring it is time for “a new generation” to lead the party. House Majority Leader Steny Hoyer and Majority Whip James Clyburn have also retired from their leadership roles. Republican California Representative Kevin McCarthy has been nominated to be House speaker.

Biden’s student loan forgiveness plan blocked by federal court

On Monday, a federal appeals court issued an injunction blocking the Biden administration’s student loan forgiveness plan. The court says President Joe Biden’s move to cancel up to $20,000 in student debt per borrower would exceed his authority. The decision comes three weeks after the federal appeals court issued a temporary stay pausing the plan while the case was reviewed. The Department of Education is moving to overturn the attempt to block the plan.

Corporate/Sector News

Ticketmaster-Taylor Swift debacle leads to investigation

After Ticketmaster’s pre-sale of Taylor Swift concert tickets crashed its website, the Justice Department announced an antitrust investigation into Ticketmaster’s parent company, Live Nation Entertainment. While the chaotic week for Taylor Swift fans has brought the company into the spotlight, members of the antitrust team at the Justice Department has been looking into Live Nation’s practices for the last few months in order to determine if the company is abusing its power over the multibillion-dollar live music industry. The event is bringing the political debate surrounding antitrust laws back to the forefront.

Twitter employees resign over Musk’s Twitter 2.0

More than a thousand Twitter employees, including leaders in software development and engineering, resigned this week. The slew of resignations came on Thursday after Elon Musk, Twitter’s new chief, set a 5:00 PM ET deadline for employees to commit to Twitter 2.0 – Musk’s “extremely hardcore” culture which would entail “working long hours at high intensity.” The exodus forced Twitter to close their offices on Friday, like it did following the layoffs of half of the company’s staff. Twitter’s stock was delisted from the New York Stock Exchange last week after it was formally acquired by Elon Musk.

FTX crash shakes up crypto market

Crypto markets were shaken up last week after FTX, one of the largest global cryptocurrency exchanges, suddenly failed. The event was triggered by the lending of nearly $10 billion in customer funds to an affiliated trading firm. The crypto market has suffered this year due to its light regulation, uncertain value of collateral, and large quantities of leverage that have led to a series of risk-off events in traditional finance markets. For example, the value of Bitcoin has declined from about $60,000 a year ago to $16,600 this week. Following FTX’s crash, US regulators and the US Department of Justice are investigating the company’s use of customer funds.

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Source: Financial Times