Stocks experienced a massive sold off this week which led to the S&P 500 losing 4.1%. The main catalysts behind the market selloff are fears of a potentially weakening economic and earnings growth. The selloff left the stocks at three-months low as earnings for the third quarter of the year are about to be released by the company. The Dow Jones Industrial Average, on the other hand, dropped 4.2% over the past seven weeks while the tech-heavy Nasdaq Composite slipped by 3.7%.
During the week, the International Monetary Fund (IMF) slashed its 2018 and 2019 global growth outlook to 3.7% from 3.9%. The organization cited the ongoing trade wars and its uncertainties such as tariffs between the U.S. and China, a pending Brexit deal, and the new trilateral agreement between the U.S., Canada, and Mexico as the main reasons behind its cutting down on the growth forecast.


Regarding the ongoing trade war, President Trump and Chinese leader Xi Jinping have reportedly agreed to meet at next month’s G-20 summit with the expectations that the trade conflict would be resolved.
The Q3 earnings of specialty chemicals company PPG Industries (PPG) played a role in swaying the position of investors. The earnings dampened any hopes of another strong quarterly earnings for companies in the country. Yesterday, financial service companies JPMorgan Chase (JPM), Citigroup (C), and Wells Fargo (WFC) reported their Q3 earnings and the results were mixed.
JPM and C were able to beat the bottom-line estimates while WFC missed analysts expectations. The market initially had a positive reaction to those earnings report yesterday but it later saw the financial sector recorded a total loss of 5.6% for the week. A curve-flattening trade in the bond market didn’t also go down well with lenders as it depends on the interest-rate differential between what they pay for deposits and what they stand to make on the loans.
The yield on the benchmark 10-yr Treasury note, which spiked to a seven-year high last week stayed around 3.12% and 3.26% before eventually settling Friday at 3.14%. This means that it had dropped by nine basis points from its position last week. On the other hand, the yield on the more Fed-sensitive 2-yr Treasury note dropped by four basis points to end the week at 2.84% loss.
According to President Trump, this week’s market selloff was as a result of the Federal Reserve going crazy with its rate hikes. Since the start of the year, the Feds have raised rates three times already and it is set to raise them again before the end of the year.
The S&P 500 surpassed its 50-day moving average on Wednesday and then its 200-day moving average on Thursday. It, however, tried to recover its 200-day moving average on Friday but ended the week right at the key technical mark. 
The Dow Jones Industrial Average and the Nasdaq Composite meanwhile surpassed their 200-day moving averages also, with the Dow able to reclaim its key technical level while NASDAQ failed to do that.
The CBOE Volatility Index (VIX), which is known as the “investor fear gauge,” reached 28.64 during the week, which is its highest level since March. It, however, pulled back a bit on Friday but still managed to end the week at nearly 40% higher than what it started with.
The Hurricane Michael made landfall in the Florida Panhandle on Thursday and was deemed a category 4 storm. It has already caused some devastating effects in the region, with billions of dollars lost as damages and at least 13 people killed. Most of the oil producers in the Gulf of Mexico stopped productions in anticipation of the storm, leading the WTI crude to dip this week. It slipped by 3.9% to $71.41/bbl and caused the S&P 500’s energy sector lost 5.4%.
Next week will see the earnings report of Bank of America (BAC), Charles Schwab (SCHW), UnitedHealth (UNH), Johnson & Johnson (JNJ), Morgan Stanley (MS), Goldman Sachs (GS), IBM (IBM), Netflix (NFLX), Travelers (TRV), American Express (AXP), PayPal (PYPL), Procter & Gamble (PG), and a host of others all reported.
Investors would also be able to receive the September Retail Sales, Industrial Production and Capacity Utilization, Housing Starts and Building Permits, Existing Home Sales, and the minutes from the September FOMC meeting.
It would be an action-packed week for both the stock and the financial markets.

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