2022 | October 10

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Stocks Gain Modestly

Stocks started the week and a new quarter on a sharply positive note with rallies on Monday and Tuesday, only to turn negative the next three days. Nevertheless, the major U.S. stock indexes posted weekly gains of around 1% to 2%, marking just the second positive week out of the past eight. The S&P 500 closed on Friday at 3,639.7 for a gain of 1.6% on the week.

The market rally on Monday and Tuesday sent the S&P 500 to its biggest two-day surge since March 2020, as the index added a total 5.7%. The biggest daily gain came on Tuesday after monthly data showed a decline in job openings, fueling speculation that the Fed might be more open to moderating its path of aggressive interest-rate increases.

Stocks fell on Friday after a solid monthly jobs report raised expectations that the U.S. Federal Reserve next month will approve a 0.75 percentage point interest-rate increase for the fourth meeting in a row. Although September’s jobs gain total of 263,000 was down from the prior month’s 315,000 figure, it was modestly above economists’ expectations, and the unemployment rate slipped to 3.5% from 3.7%.

Oil prices reversed their recent downward momentum after the OPEC consortium of oil producers and its Russia-led allies agreed on Wednesday to cut output by 2 million barrels of oil a day. After ending the previous week just below $80 per barrel, U.S. crude oil was trading near $93 on Friday.

The yield of the 10-year U.S. Treasury bond rose yet again in another volatile week in the bond market. On the heels of Friday’s monthly jobs report, the yield climbed to around 3.88%—down from a recent high of 3.96% on September 27, but still near the highest level in 14 years.  

The new U.K. government, led by Prime Minister Liz Truss, abruptly dropped a plan to implement tax cuts and spending increases funded by borrowing. The reversal came after the initial announcement of the tax cut plan on September 23 triggered a sharp decline in the value of the British pound. As of Friday, relative to the U.S. dollar, the pound had recovered most of the ground lost in that initial drop.

As major banks prepare to open third-quarter earnings season this week, the number of companies that recently raised their earnings forecasts exceeded the totals that lifted their outlooks prior to the previous two quarters, according to FactSet. Nevertheless, companies in the S&P 500 are expected to report the lowest year-over-year earnings growth since the third quarter of 2020.

A Consumer Price Index report scheduled to be released on Thursday will show whether the recent moderation in inflation extended into September. In August, inflation rose at an annual 8.3% rate, marking a slight slowdown from the previous month’s 8.5% figure, largely due to falling gasoline prices.  

Source: John Hancock Investment Management

Stock Market In Election Years

And The Winner Is...

They didn’t get as much press as the Nobel Prizes, but 10 Ig Nobel Prize winners were also named recently. The Igs honor “…achievements that make people laugh, then think. Good achievements can also be odd, funny, and even absurd, so can bad achievements. A lot of good science gets attacked because of its absurdity. A lot of bad science gets revered despite its absurdity.”

This year’s winners included scholars of scorpion constipation, duckling swimming, ice cream cryogenics, romantic heart rate synchronization and other scintillating scientific topics. For example,

• The Biology Prize went to Solimary García-Hernández and Glauco Machado for “Short- and Long-Term Effects of an Extreme Case of Autotomy: Does ‘Tail’ Loss and Subsequent Constipation Decrease the Locomotor Performance of Male and Female Scorpions”

To escape predation, some types of scorpions shed their tails, losing a portion of their digestive tracts. This causes constipation. García-Hernández and Machado’s research investigated whether scorpions’ ability to move was affected by the change. They found that running speed was unaffected over the short-term. However, over the longer-term, tail loss and constipation hurt the running speed of males but not females.

• The Economics Prize went to Alessandro Pluchino, Alessio Emanuele Biondo, and Andrea Rapisarda for “Talent vs. Luck: The Role of Randomness in Success and Failure.”

Western culture often asserts that success is the result of talent, intelligence, hard work, commitment and other personal traits. The research found that luck plays an outsized role. The researchers used mathematics to explain “why success most often goes not to the most talented people, but instead to the luckiest.” This was the second Ig for Pluchino and Rapisarda, whose previous win was for a paper explaining that promoting people at random could make organizations more efficient.

• The Peace Prize went to Junhui Wu, Szabolcs Számadó, and their co-authors for “Honesty and Dishonesty in Gossip Strategies: A Fitness Interdependence Analysis.”

The researchers investigated gossip and developed a mathematical model for honest and dishonest gossip. During their acceptance speech, the researchers explained, “…gossiping people can be honest or dishonest, depending on how much they value the targets and recipients of gossip.”

Each of the Ig Nobel winners received a $10 trillion Zimbabwean banknote worth about far less than one trillion dollars. The awards were presented by actual Nobel Prize winners.