Stock Market This Week – 11/04/23

Stock Market This Week

Stock Market This Week – 11/04/23

Two significant events happened this week. First, the unemployment report was weak and did not match expectations. Moreover, the unemployment rate ticked up by 0.1% to 3.9%. However, a 0.1% increase is minuscule, and 3.9% is still sub-4%; the U.S. economy is still performing well.

Second, the U.S. Federal Reserve paused again, and their statement was less hawkish. My personal belief is they are done raising interest rates.

Consequently, Treasury bond rates dropped a lot, and oil prices moved downward. Simultaneously, the stock market surged. Dividend stocks were a beneficiary as investors moved money into them. For instance, Verizon (VZ) was trading at about $30 to $31 per share and yielding north of 8%. The share price is $36, and the yield is roughly 7.4%. I was a buyer for the past few months, changes in macroeconomic trends and solid third quarter results reversed sentiment.

Overall, 2023 has been difficult for dividend growth and income investors. However, patience pays off in the stock market because it moves up in the long run despite short-term volatility.

Stock Market Overview

As shown by data from Stock Rover*, the stock market had an excellent week, the best one in 2023. The Russell 2000 performed the best, followed by the Nasdaq Composite, the S&P 500 Index, and the Dow Jones Industrial Average (DJIA). All the major indexes gained at least 5%.

All 11 sectors had positive returns. Real Estate, Communication Services, and Financial Services were the top three sectors. But the Healthcare, Communication Defensive, and Energy sectors were the bottom three.

Oil prices decreased nearly 5.5% for the week to ~$80 per barrel, the lowest in weeks. The VIX plunged about 29% to below its long-term average. Gold stayed at nearly $2,000 per ounce.

The Nasdaq is performing the best for the year, followed by the S&P 500 Index, the Dow 30, and the Russell 2000. Despite recent weakness, the Nasdaq remains in a bull market. After turning negative last week, the DJIA and Russell 2000 returned to positive territory for the year. In addition, seven of the 11 sectors are up year-to-date. The three best-performing sectors are Technology, Communication Services, and Consumer Cyclical. But the worst-performing sectors are Consumer Defensive, Healthcare, and Utilities.

The dividend growth investing strategy has returned to positive results across all categories. The recent market volatility has lowered returns, but the trend has reversed. The table below shows their performance by category.

Category	YTD Return (%)
Dividend Kings	-3.49%
Dividend Aristocrats	-0.27%
Dividend Champions	-2.09%
Dividend Contenders	+0.16%
Dividend Challengers	-0.44%

Stock Market Valuation This Week

The S&P 500 Index trades at a price-to-earnings ratio of 24.08X, and the Schiller P/E Ratio is about 25.90X. These multiples are based on trailing twelve months (TTM) earnings.

The long-term means of these two ratios are approximately 16X and 17X, respectively. 

The market is still overvalued despite the recent correction and a bear market and rebound. Earnings multiples of more than 30X are overvalued based on historical data.

Economic News This Week

Provided by Stock Rover*.

Consumer Confidence Index

The Conference Board’s Consumer Confidence Index® declined in October to 102.6 (1985=100), down moderately from September’s upwardly revised 104.3. This marks the second-lowest reading of 2023. The Present Situation Index, based on consumers’ sentiment toward current business conditions and the labor market, dropped to 143.1 from 146.2. The Expectations Index, based on consumers’ six-month outlook for income, business, and labor market conditions, also moved down to 75.6 from an upwardly revised 76.4 the previous month. “Consumer confidence fell again in October 2023, marking three consecutive months of decline,” said Dana Peterson, Chief Economist at The Conference Board. “October’s retreat reflected pullbacks in the Present Situation and Expectations Index. 

Write-in responses showed that consumers continued to be preoccupied with rising prices in general and grocery and gasoline prices in particular. Consumers also expressed concerns about the political situation and higher interest rates.” A majority of consumers surveyed in October perceived that a recession was ‘somewhat’ or ‘very likely.’ The share of consumers planning to buy major appliances and cars increased, while those planning to purchase homes decreased. The percentage of consumers that said jobs are currently plentiful was reported at 39.7%, down from 39.4% the previous month. Consumers that said jobs are currently hard to get declined to 13.1% from 14.2%.

U.S. Federal Reserve

The Federal Open Market Committee (FOMC) announced that it would keep its benchmark federal funds rate in the range of between 5.25% to 5.5%. The vote was unanimous to maintain the current benchmark federal funds rate. The central bank has raised its benchmark borrowing rate 11 times. The FOMC statement stated that “In determining the extent of additional policy firming that may be appropriate to return inflation to 2% over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments,”. The Fed did not rule out the possibility of more increases. Federal Reserve Chairman Jerome Powell, in his post-meeting press conference, reiterated that the Fed has yet to determine whether financial conditions are restrictive enough, stating, “We haven’t made any decisions about future meetings.” When pressed further about a December rate hike, Powell said, “The idea that it would be difficult to raise again after stopping for a meeting or two is just not right. I mean, the Committee will always do what it thinks is appropriate at the time”.

Jobs and Unemployment Rate

The U.S. Bureau of Labor Statistics reported 150,000 jobs were added as the unemployment rate ticked up to 3.9% in October. August and September’s employment readings were revised down for a combined (-101,000) less jobs. The number of unemployed workers was little changed at 6.5 million. Healthcare care led the way, adding (+58,000) jobs, followed by government (+51,000), construction (+23,000), social assistance (+19,000), and leisure & hospitality (+19,000). Manufacturing (-35,000), transportation & warehousing (-12,000), and information (-9,000) all reported job losses. 

Among the unemployed, the number of permanent job losers increased (-164,000) to 1.6M, and the number of reentrants to the labor force decreased (-159,000) to 1.89M. The labor force participation rate was little changed at 62.7%, leaving it still below the pre-pandemic level of 63.4%. Average hourly earnings increased by 0.2%. At $34.00, average hourly earnings are up 4.1% from a year ago. The average hourly earnings growth reading was the lowest monthly value since February 2022 and the lowest year-over-year value since June 2021.

Resources

• Stock Market Holidays
• Dividend Stock Lists
• Investor Relations Guides
• Checking and Savings Account Resources
• Dividend Investing Resources
• Reviews

Curated Weekend Reading From Around The Web

Portfolio Management and Investing

• Paying Less Tax: The Tax-Loss Harvesting Advantage (Visual Capitalist)
• Why Aren’t Stock Down More? (The Irrelevant Investor)
• A Disordered Mind Makes Mutual Fund Salad (Demonetized)

Retirement

• Is the 60/40 Portfolio a Good Investment Now (Morningstar)
• Life After FI – 5 Years After Retirement (All Options Considered)
• 20% of Retirees Are Already Back at Work (Financial Freedom Countdown)

Financial Independence

• AI Makes People More Effective if They Embrace It (Klement on Investing)
• The 3 Types of Failure (The Art of Manliness)
• The 5-Minute Top Dop List (the art of non-conformity)