- US stocks ended the day with a slight gain, despite Federal Reserve warnings that more policy tightening was on the way. Oil futures fell on indications that the market is currently oversupplied.
- The S&P 500 index gained 0.5% on Friday to finish the week down 0.7%, while the Nasdaq 100 fell 1.2% in the previous five days. Trading volumes were low during Friday's $2.1 trillion options expiration, which is typically a day when volatility spikes as traders and dealers rebalance their large exposures.
- Treasury yields rose again on Thursday following hawkish remarks from St. Louis Fed President James Bullard, who said interest rates needed to rise to at least 5%-5.25% to curb inflation. Similarly, Minneapolis Fed President Neel Kashkari stated on Thursday that it is a open question how far the central bank needs to go with rates to bring demand back into balance.
- Continuously rising interest rates are already putting pressure on global demand. Copper and Oil prices, which are sensitive to growth, were set to fall for the week due to concerns about a worsening outlook. For the first time in nearly a year, US Crude futures indicated an oversupply. Higher mortgage rates slowed sales of previously owned US homes for the ninth consecutive month in October.
- However, some equity investors believe that hawkish Fed commentary does not necessarily imply that rates will peak at higher levels than previously thought. And traders remain confident that the Fed will reverse course and begin cutting rates in late 2023.
