Thursday, 8 November 2018

After a rocky few weeks for U.S. stocks, the market has shown signs of stabilizing following the midterm elections. The election results eliminated a source of angst for investors and ignited a market rally on Wednesday with the Dow surging nearly 550 points.

Technology stocks, which suffered the most in October, have rebounded somewhat this month. Despite strong returns over the past week, the S&P 500 and the Nasdaq slipped some on Thursday over concerns around oil prices and rising interest rates. U.S. oil prices have declined into bear market territory over rising global production, a strong dollar, and concerns over long-term demand. U.S. crude oil dropped to $60.63 down from its high of $76 a barrel on October 3rd. 

Following the Federal Reserve meeting on Thursday, the yield on the 2-year Treasury note rose to 2.97% - one of the highest levels in over 10 years, while the yield on the 10-year Treasury note rose to 3.24%. 

On Thursday, the Federal Reserve left short-term interest rates unchanged, as expected. The central bank has already increased rates three times this year and is poised to raise rates once more in December. In the minutes, the Fed indicated that it expects inflation to hover around 2% both in the short and long term. The central bank emphasized the economy’s continued strength indicated by strong employment numbers and consumer spending. However, it indicated that business investment “has moderated from its rapid pace.”

According to the U.S. service sector, as gauged by the Institute for Supply Management’s nonmanufacturing index, the economy is still robust. In fact, nearly every service industry expanded in October. One of the biggest concerns, brought up by executives in ISM’s survey, is the difficulty in finding suitable workers. This sentiment was echoed in the September U.S. job openings report released this week, which showed that there are still more available jobs than unemployed Americans. Initial jobless claims, which indicate the number of Americans getting unemployment benefits, fell to its lowest level since the summer of 1973. 

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