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IT was a mixed week for markets before major indices eventually found buyers at technical support levels. The blue-chip S&P 500 and technology-focused Nasdaq indices gained 1.1% and 1.3% respectively.
Spiralling US debt levels continued to cause unease and $275 billion was added to the nation’s total debt in a single day, taking the total amount to a record $33.4 trillion. Just two weeks ago that total US debt hit $33 trillion for the first time ever, which means the US has added $32 billion per day since then, or $1.4 billion per hour. The US is now on track to add $1 trillion of debt in a month at its current pace.
On Friday, the US nonfarm payrolls report for September revealed that 336,000 new jobs had been added, marking the most substantial surge since January, and exhibiting a sharp increase from the preceding month’s adjusted gain of 227,000, and significantly higher than the 177,000 expected. Although the announcement initially triggered a precipitous decline in both stock and bond prices, a sharp rebound followed later in the day as investors paid more attention to modest elevation in average hourly earnings and potential distortions from seasonal adjustments in job gains.
The payrolls report also bolstered the prospect for higher-for-longer interest rates, pushing US Treasury yields higher. The yield on the benchmark ten-year Treasury note climbed to 4.8%, the highest level since September 2007.
Geopolitical tensions rose once again in the Middle East over the weekend following Hamas’s attack on Israel. The large-scale surprise operation initiated by Gaza militants in the early hours of Saturday morning left hundreds of Israelis dead and prompted a “mighty vengeance” of Israeli airstrikes and a formal declaration of war.
The risk that the conflict may spill over into the wider region triggered a kneejerk spike in oil prices, which had fallen more than 8% earlier in the week over concerns that higher bond yields would slow the global economy, weakening demand.
In other news, and what will no doubt make for a gripping movie or Netflix series, this week marked the start of the highly anticipated trial of Sam Bankman-Fried, the chief executive of failed crypto exchange FTX. He faces multiple charges, including wire fraud, conspiracy to commit money laundering and campaign finance law conspiracy.
SBF, who has denied the charges, is accused of defrauding customers of the cryptocurrency platform by secretly siphoning billions of dollars out of customer deposits from FTX to cover losses from his investment firm, Alameda Research.
Once the allegations of the illicit transferring of customer funds started to spread, it was the beginning of the end for FTX, as customers rushed to withdraw deposits but were unable to as the platform had insufficient funds. SBF’s defence is expected to argue that Caroline Ellison, Alameda Research’s former chief executive and the defendant’s ex-girlfriend, is to blame. Ellison pleaded guilty in December and is now star witness for the prosecution.
Looking ahead, it is another busy week for economic data. Investors will be focusing on the Fed speeches early in the week, with Federal Open Market Committee minutes and inflation data being released towards the end of the week. It is also the beginning of the quarterly earnings season, with consumer Staple PepsiCo being the first big name to report on Tuesday, and financial giants JP Morgan, Wells Fargo, Citi, and BlackRock all reporting on Friday.
