Large cap technology stocks led the market higher last week thanks in large part to stellar earnings results from tech bellwethers like Alphabet (Google) and Microsoft. The rally pushed the Dow, S&P 500, and Nasdaq Composite to fresh record highs on the final day of October, with the S&P and Nasdaq both delivering a return of over 7% for the month. Cyclicals lagged somewhat as inflation concerns eased and energy prices edged lower. Meanwhile, international stocks were mixed, with developed markets close to flat while emerging markets were once again pulled lower by a selloff in Chinese equities.

Growth stocks also got a boost from falling Treasury yields last week. The curve flattened considerably, with 2y yields hitting 50bp (+5bp on the week) while 10y yields fell 8bp and 30y yields were lower by 14bp. Fed funds futures markets are now pricing in a >75% chance of a rate hike occurring by June of 2022, much earlier than current consensus expectations from sell side economists.

Not all of the news was good last week, however. Q3 GDP came in lower than expected at +2.0% annualized, while Apple and Amazon both missed consensus earnings estimates, citing severe supply chain constraints that impacted revenues as well as input cost inflation that put pressure on operating margins. Starbucks also cited a 600bp impact to operating margins from rising wages and other inflationary pressures. As a result of these and other reports, sell side analysts have already begun lowering their earnings estimates for the balance of the year.