US stocks added to their October gains as inflation data cooled and investors interpreted Fed comments to indicate the pace of its interest rate increases will begin to slow. As of the end of November, 99% of S&P 500 companies posted earnings and 70% reported earnings above estimates. Economic news was mixed over the month. Job growth slowed in September, with US employers adding 261,000 jobs, above the 205,000 estimate. The unemployment rate edged up to 3.7% in October from 3.5% in September. The producer-price index increased by 8% annually in October, down from 8.5% in September. CPI increased by 7.7% in October, below the expected 7.9% increase and down from 8.2% in August. Core CPI, which excludes food and energy, rose by 6.3% in October below the 6.5% estimate. The personal consumption expenditures index, the inflation gauge the Fed prefers, was up 6% in October, down from the upwardly revised 6.3% annual increase reported for September. Third quarter US GDP was upwardly revised to 2.9% from the initial 2.6% reported increase. US retail sales rose 1.3% in October above the expected 1% gain. Sales of existing homes in the US declined for the ninth straight month in October as sales declined 5.9%.
Foreign stocks sharply rebounded in November as Chinese equities led global markets higher on hopes of reopening from Covid lockdowns. The U.K.’s annual rate of inflation rose to 11.1%, a 41-year high in October on surging energy prices. The U.K. government outlined tax increases and spending cuts, shifting policy to start sharply limiting its spending growth after years of fiscal stimulus during the pandemic and recent energy subsidies. The Bank of England raised its key interest rate by 0.75%, the largest increase since 1989. The Eurozone’s headline inflation rate hit 10.7% in October, up from 9.9% in September. Easing of Covid restrictions had a positive impact on foreign markets as Chinese equities surged with the economy reopening. Hong Kong’s main index rose 27% in November, the most since 1998. The US dollar fell sharply, dropping 5% in November for its worst monthly performance in 12 years. The decline in the US dollar is a positive for US investors in foreign markets. Oil prices declined in November, ending the month at $80.55 per barrel, down from $88.37 to end October. Emerging markets outpaces developed markets over November while developed markets topped emerging markets over the year-to-date and trailing year.
Interest rates fell in November as bond markets priced in the expected slower pace of future rate increases. The Federal Reserve increased its key rate by 0.75% for the fourth consecutive time at the November meeting, bringing the rate to a range of 3.75% to 4%. Federal Reserve Chairman Powell said in remarks delivered at the Brookings Institution that smaller interest rate increases are likely ahead and could start in December. He cautioned that policy is likely to stay restive for some time until data shows signs of significant progress on inflation. Fed meeting minutes signaled the desire of officials to slow down the pace of rate increases. The yield on the 10-year Treasury fell in November, ending at 3.70% down from 4.07% at the end of September. The rate for a 30-year fixed-rate mortgage fell to 6.5% to end November down from 7.1% to end October. US credit bonds were the top performer for November, while US Agency bonds were the top performer for the year-to-date. Longer-term bonds outpaced shorter-term bonds for November, while shorter-term bonds outpaced for the year-to-date.
|Index Performance||November||Year to Date||Trailing 12 Months|
|US Stocks (Russell 3000)||5.22%||-14.18%||-10.80%|
|Foreign Stocks (FTSE AW ex US)||11.69%||-14.76%||-11.11%|
|US Bond Mkt. (BBgBarc Int. Gov/Cred)||2.17%||-8.07%||-8.19%|
|Municipal Bonds (BBgBarc 1-10 Yr Muni)||2.66%||-4.90%||-4.78%|
|Cash (ICE BofA ML 3-Mo T-Bill)||0.32%||1.09%||1.10%|