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Financial markets had a positive week, with major US indices reaching new all-time highs, largely driven by cooler-than-expected inflation data and strong corporate earnings.
Key Points:
US Equities Hit Record Highs:
$SPX500$DJ30 and $NSDQ100 all posted gains, with the S&P 500 breaching the 6,800 level.
Strong performance was noted particularly in the Information Technology and Energy sectors.
Softer Inflation Bolsters Rate Cut Expectations:
The release of the delayed September Consumer Price Index (CPI) showed that both headline and core inflation were slightly lower than consensus estimates. This news reinforced market expectations for the Federal Reserve to implement an interest rate cut at its upcoming meeting, with further easing anticipated into next year.
Strong Earnings Season Continues
The third-quarter earnings season is progressing robustly, with a high percentage of companies beating both top and bottom-line estimates. A significant portion of this growth continues to be generated by mega-cap technology stocks, often referred to as the "Magnificent Seven."
Treasury Yields Stabilize
US Treasury yields were mostly flat to slightly down across the curve this week, with the 10-year yield trading around the key 4.00% level. This stabilization reflects the increasing optimism about the Fed's pivot to rate cuts.
Other Market Dynamics
Volatility, as measured by the $VXX (iPath Series B S&P 500 VIX Short-Term FuturesTM ETN) eased below the 20 mark. Trade tensions, particularly between the US and China, briefly caused market jitters but stocks quickly recovered as analysts anticipate a de-escalation based on the economic reality of complex global supply chains.
The overall sentiment remains bullish, with the focus now shifting to the heavy schedule of mega-cap tech earnings releases and the Federal Reserve's rate decision next week.
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