Key takeaways
- Global equities decline
- U.S. earnings remain robust
- Bank of England stays on hold
Markets turn lower on sentiment shift
Global equities fell about 1.5% through Thursday’s close, marking a more cautious tone across markets. U.S. stocks led the decline, with the tech-heavy Nasdaq down nearly 3% for the week. In our view, the pullback was driven more by a shift in investor sentiment than by changes in fundamentals.
Even so, corporate earnings remain a bright spot. With the third-quarter reporting season continuing, S&P 500 earnings are tracking almost 17% higher year-over-year—far above early estimates of 8% growth. This strength underscores continued resilience among U.S. large-cap companies.
U.S. economic data remains mixed
The latest U.S. economic data continues to paint a mixed picture. Private-sector employment from payroll processor ADP showed a return to modest job growth in October following a brief contraction. The ADP numbers have taken on heightened importance amid the government shutdown, since the monthly employment reports from the Labor Department won’t be available until after the government reopens. Elsewhere, the latest reading from the Institute for Supply Management showed activity in the services sector rebounded into expansionary territory last month.
Meanwhile, layoff announcements compiled by outplacement firm Challenger, Gray & Christmas rose to their highest October level in more than 20 years. However, state-level data on initial jobless claims shows that overall layoff activity remains fairly low on a historical basis, reinforcing the idea of a “low-hire, low-fire” job market.
Bank of England leaves rates unchanged
On Thursday, the Bank of England voted 5-to-4 to keep its policy rate unchanged but signaled that inflation has probably peaked. Policymakers hinted that rate cuts could be considered as early as December. The announcement eased pressure on long-term UK government bonds, with the 10-year gilt yield falling toward the bottom of its 2025 range—an encouraging development for fixed-income investors.