Last week, the three major stock indexes of the US stock market all achieved cumulative gains.$Dow Jones Industrial Average (.DJI.US)$Up 5.7%, the index rose for the fourth week in a row.$S&P 500 index (.SPX.US)$和$Nasdaq Composite Index (.IXIC.US)$The increases were 4% and 2.2%, respectively.

With the last trading day left in October, the Dow is up 14.4% so far this month, which is on track for its biggest monthly gain since January 1976, when the index rose 14.41%. Other major stock indexes underperform the Dow: the Russell 2000 is up 11% so far in October, the s & p is up 8.8%, and the Nasdaq is up 5%.

Although all the major stock indexes performed well in October, it is a noteworthy phenomenon that the Nasdaq outperformed the Dow, and October is likely to be the largest month for the Nasdaq to outperform the Dow since 2002.

The trend of US stocks last week

Nasdaq is likely to continue to lose, and investors are still waiting for more cost-effective buying opportunities.

The phenomenon of running and losing the Dow is not common. The Dow outperformed the Nasdaq by more than 9 percentage points this month, the biggest since February 2002, when it beat the Nasdaq by 12.35 percentage points, the seventh largest monthly gap in 45 years.

The failure of the NASDAQ is due to the poor performance of the largest component in the index. In the past week$Meta Platforms (META.US)$Plunge 24%$Alphabet-A (GOOGL.US)$Down 4.8%$Amazon (AMZN.US)$Down 13%$Microsoft (MSFT.US)$Down 2.6%. Only$Apple (AAPL.US)$The share price rose after the announcement of the results, up 5.8% last week.

Michael Shaoul, chief executive of Marketfield Asset Management, wrote in the research paper: "this is the first time in 20 years that technology investors' assumptions that such stocks can easily win have been so severely challenged. "

History shows that this kind of losing market will continue. The Dow outperformed the Nasdaq by at least 7 percentage points in several months in 1978, 1980 and 1992, respectively, but the most months were during the bursting of the dotcom bubble: from 1999 to 2002, the Dow outperformed the Nasdaq in 12 months. When the s & p 500 outperformed the Nasdaq in 1978, 1980 and 1992, the index continued to rise over the next six months, rising by an average of 9.5%. During the bursting of the dotcom bubble, when it came to the months when the Dow outperformed, the s & p 500 fell by an average of 9.9%.

Marta Norton, chief investment officer for America at Morningstar Investment Management (Morningstar Investment Management), points out that while the excitement surrounding technology stocks is similar to the dotcom boom, the fact that technology stocks are now known as "Big Tech" shows that the quality of technology companies is much better than it used to be. However, many of these stocks still have very high valuations. "We want to buy them, but we want to buy them when they get cheaper," Norton said. "

The market generally recovers, but it is too early to bet that the Fed will slow down the pace of raising interest rates.

The chances of the Fed raising interest rates by another 75 basis points at this week's Fed policy meeting, according to CME FedWatch, are 81 per cent and the federal funds rate will rise to a range of 3.75 to 4 per cent. It will be the fourth consecutive 75 basis point rate hike by the Fed and the most aggressive rate hike since the early 1980s. The Fed's current median forecast is that the policy rate will rise to 4.40% by the end of the year.

Over the past week, however, there have been clear signs of easing in the stock, foreign exchange and credit markets.

The soaring dollar lost momentum, and the dollar index fell back to around 110 from 113 in mid-October. Rich Ross, a technical analyst at Evercore ISI, wrote in a note to clients that he would buy all in shares if the dollar index fell below 108. Because the reversal of the dollar will reduce the drag on US corporate profits, the strong dollar has been one of the most worrying issues of the current earnings season.

Treasury yields fell significantly, with the benchmark 10-year Treasury yield falling below 4 per cent at one point from about 4.25 per cent at the beginning of last week. More importantly, the real yield on 10-year inflation protected bonds (TIPS), adjusted for inflation, has fallen by a similar magnitude.

Although the share prices of some large technology companies fell sharply last week, the overall performance of the stock market was good and did not seem to show that the stock market was afraid of the Fed, even as the dual pressure of rising real interest rates and the appreciation of the dollar abated.

Judging from the trend of the futures market, the market seems to be betting that future interest rate increases will decline, with the current possibility of a 50 basis point rate hike in December being more than 75 basis points. However, Powell and other Fed policy makers may not want to see that happen. Brean Capital economic advisers John Ryding and Conrad DeQuadros wrote in a note to clients that the market thought the Fed's policy was about to shift and that Powell should correct that miscalculation. Don't forget, Powell said at a global central bank meeting in Jackson Hole at the end of August that the Fed "must hold on until the task of curbing inflation is complete," even though it may cause pain to the economy.

In addition, Ledding and de Caderos point out that the Fed must avoid sending signals like those of the ECB last week. After raising its key interest rate by 75 basis points, the ECB said it had made "substantial progress" in tightening policy, but the Fed's most concerned indicator of inflation showed no sign of slowing, with the core PEC price index rising 5.1 per cent year-on-year in September, still well above the Fed's 2 per cent target. Even if the Fed raises interest rates by 75 basis points this week, the real interest rate is still-2.3%, and the tightening is not enough.

Recent movements in the foreign exchange, government bond and risk markets suggest that the market has fuelled optimism that interest rates will be lower in the future, but this may run counter to the Fed's plan.