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Nov 02, 2022

October 2022

Provided by YCharts

Stocks posted strong gains
 in October, what has historically been the worst month of the year for equities. The Dow Jones Industrial Average surged 14.1%, the S&P 500 advanced 8.1%, and the NASDAQ tacked on 3.9%. These gains follow the worst month for US equities since March 2020. Year-to-date, the S&P 500 dug itself out of bear market territory but is still down 17.7%. The NASDAQ is off 29.3%, and the Dow is only 8.4% lower.

Unlike September, in which no sector finished in the black, all eleven sectors had a plus sign next to their name in October. Energy was up a whopping 25.0% thanks to rebounding oil prices, followed by a 13.9% jump for Industrials and 11.9% for Financials. The two relative laggards were Consumer Discretionary and Communication Services. Amazon (AMZN) weighed on Consumer Discretionary after reporting disappointing Q3 earnings—its stock sank 9.3% in October. Meta Platforms (META) did the same to Communication Services when its earnings miss caused the stock to plummet 30.4% for the month.

Mortgage rates surged to levels not seen in two decades. The 30-Year Mortgage Rate closed out October at 7.08%, surpassing 7% for the first time since 2002. The 15-Year reached 6.36% at month’s end, marking its highest level since 2007. Mortgage rates have increased 2.7x and 2.3x respectively since a year ago. On the inflation front, September’s inflation rate was little changed from August, but core inflation increased for the second consecutive month.

The yield curve further solidified its inverted state in October as the 10 Year-3 Month Spread flipped to negative for the first time in three years. The 10 Year-3 Month joined the 10-2 Spread in the inversion club, as the latter ended October 41 basis points below zero. The 1-Year Treasury Bill’s yield of 4.66% was the highest rate among US Treasuries. Every Treasury instrument was yielding north of 4% as of October’s end—the one exception was the 1-Month T-Bill, which closed out the month at 3.73%.

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