Weekly Market Update | Week 41, 2024


New All-Time Highs (again)

The S&P 500 and the Dow scored record closing highs on Friday, with the big boosts from financial stocks after banks reported strong quarterly results while the latest inflation data fueled expectations for a U.S. Federal Reserve rate cut in November. The S&P and Nasdaq each logging their fifth straight week of gains. The The Nasdaq is now 1.6% below its Jul 10th  record close. The small-cap Russell was boosted by strong Friday performance. 

Banks were stronger, particularly after Friday earnings from JP Morgan Wells Fargo. Treasuries were weaker with the curve steepening. Long-end yields continued last week’s run-up; the 10Y is up ~35bp over the past eight sessions.  The dollar was higher on the major crosses; DXY +0.4% had risen for nine straight sessions before declining Friday. Gold rose 0.3%. WTI crude settled up 1.6%, its fourth rise of the past five weeks, against a still-unsettled geopolitical backdrop.

On the Inflation front; Producers’ selling prices stayed flat in September, more evidence of cooling U.S. inflation. The producer-price index was unchanged last month compared with August, versus the 0.1% increase economists polled by The Wall Street Journal had expected. Over the past 12 months, producer prices have risen by 1.8%. In September, a 0.2% increase in producers’ services prices offset a 0.2% decline in goods prices. The figures are a gauge of how much more companies are charging for their output. September’s headline and core CPI readings came in a bit ahead of consensus, seeing increases in categories such as airline fares, used cars, and vehicle insurance. However, there were some more positive notes of a downtick in shelter inflation, which has remained notably sticky.  

There was a blizzard of Fedspeak last week, though nothing to seriously shift market expectations for another 25bp FOMC rate cut in November. Most policymakers stuck closely to their recent remarks, though the general tone was advocating a continued patient, data-driven approach. Probably the most noteworthy remark was from Atlanta Fed President Bostic, who said he could consider skipping a November rate cut should the data support that. The minutes from the FOMC’s September meeting were also released on Wednesday, though the illustration of the debate behind 25 and 50bp seemed a bit stale in the wake of the blowout September nonfarm payrolls report.

Another big prong last week was theunofficial start of the Q3 earnings season, with the big banks beginning to report on Friday. Thus far only 24 S&P 500 companies have reported for the quarter, but FactSet’s Insight suggests the index will ultimately report earnings growth of 7%+ for Q3, in contrast to the 4.4% expected as of 30-Sep (with that number moved lower by a greater-than-average number of analyst estimate cuts). There was also attention on Hurricane Milton, which cut a swath of destruction across Florida. While a devastating storm, the hurricane weakened somewhat in its approach to land, and early takes suggested the damage may have been less than feared.

Overall,bulls found continued support last week for the soft-/no-landing consensus, with thoughts that solid incoming data has not been strong enough to shift the Fed from its easing path. There remains guarded optimism about the Q3 earnings season (with initial bank earnings well received), while investors sentiment remains with positive Q4 seasonality ahead. But the bearish case continues to point to both areas of concern within the economic data and the possibility that continued growth could slow the Fed’s rate-cut plans. Broad uncertainties remain about the geopolitical backdrop and the upcoming US presidential election; and extended valuations and stretched sentiment have some analysts thinking the market has little room for error.

The market will process multiple economic releases this week, including the NY Fed’s Empire manufacturing survey; retail sales, jobless claims, and the Philly Fed index; and housing starts/permits. A total of 43 S&P constituents will report Q3 earnings.

Fixed Income

Yield Curve

September FOMC Statement   July Minutes   Credit, Liquidity and Balance Sheet    Federal Reserve Dot Plots  

Treasury.gov yields    FOMC Policy Normalization Statement     Longer- Run Goals Jan 2024

Foreign Exchange Market

Energy Complex

The Baker Hughes rig count  was up by 1 last week. There are 586 oil and gas rigs operating in the US – Down 36 from last year. 

Metals Complex  

Employment Picture  

Weekly Unemployment Claims –  Released Thursday 10/10/2024 – In the week ending October 5, the advance figure for seasonally adjusted initial claims was 258,000, an increase of 33,000 from the previous week’s unrevised level. The 4-week moving average was 231,000 an increase of 6,750 from the previous week’s revised average.

September Jobs Report –  BLS Summary – Released 10/4/2024 – The US Economy added 254k nonfarm jobs in September and the Unemployment rate decreased 0.1% to 4.1%. Average hourly earnings increased 13 cents to $35.36.  Hiring highlights include +69k Food Services and drinking places, +45k Healthcare, and +31k Government.

  • Average hourly earnings increased 13 cents/0.4% to $35.36.
  • U3 unemployment rate decreased 0.1% to 4.1%. U6 unemployment rate decreased 0.2% to 7.7%.
  • The labor force participation rate was unchanged at 62.7%.
  • Average work week decreased 0.1 to 34.2 hours.

Job Openings & Labor Turnover Survey JOLTS – Released 10/1/2024 – The number of job openings was little changed at 8.0 million on the last business day of August, the U.S. Bureau of Labor Statistics reported. Over the month the number of hires and total separations was little changed at 5.3 million and 5.0 million, respectively. Within separations, quits (3.1 million) and discharges (1.6 million) changed little.

Employment Cost Index – Released 7/31/2024 – Compensation costs for civilian workers increased 0.9% for the 3-month period ending in June 2024. Wages and salaries increased 0.9% and benefit costs increased 1.0% from March 2024. The 12-month period ending in June 2024 saw compensation costs increase by 4.1. The 12-month period ending June 2023 increased 4.5%. Wages and salaries increased 4.2 percent over the 12-month period ending in June 2024 and increased 4.6 percent for the 12-month period ending in June 2023. Benefit costs increased 3.8 percent over the 12-month period ending June 2024 and increased 4.2 percent for the 12-month period ending in June 2023. This report is published quarterly

This Week’s Economic Data – Blue links take you to data source

Producer Price Index – Released 10/11/2024 – The Producer Price Index for final demand was unchanged in September, seasonally adjusted. Final demand was unchanged in August and July. On an unadjusted basis, the index for final demand moved up 1.8 percent for the 12 months ended in September.

Consumer Price Index – Released 10/10/2024 – The Consumer Price Index for All Urban Consumers increased 0.2% in September on a seasonally adjusted basis, after increasing 0.2% in August and 0.2% in July. Over the last 12 months, the all items index increased 2.4 percent before seasonal adjustment.

U.S. Trade Balance – Released 10/8/2024  –  The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced that the goods and services deficit was $70.4 billion in August, sown $8.5 billion from $78.9 billion in July. August exports were $271.8 billion, $5.3 billion more than July exports. August imports were $342.2 billion, $3.2 billion less than July imports. The August decrease in the goods and services deficit reflected a decrease in the goods deficit of $8.4 billion to $94.9 billion and an increase in the services surplus of $0.1 billion to $24.4 billion.

Consumer Credit – Released 10/7/2024 – Consumer credit increased at a seasonally adjusted annual rate of 2.1 percent in August. Revolving credit decreased at an annual rate of 1.2 percent, while nonrevolving credit increased at an annual rate of 3.3 percent.

Recent Economic Data – Blue Links bring you to data source

PMI Non-Manufacturing Index – Released 10/3/2024 – Economic activity in the services sector expanded in September for the third consecutive month indicating expansion in seven of the nine months of 2024. The Services PMI® registered 54.9 percent, the highest reading since February 2023 and 3.4 percent higher than August’s reading of 51.5 percent.

U.S. Construction Spending – Released 10/1/2024 – Construction spending during August 2024 was estimated at a seasonally adjusted annual rate of $2,131.9 billion, 0.1 percent below the revised July estimate of $2,133.9 billion. The August figure is 4.1 percent above the August 2023 estimate of $2,047.4 billion.

PMI Manufacturing Index – Released 10/1/2024 – The September Manufacturing PMI registered 47.2 percent, unchanged from August . The manufacturing sector contracted in September for the sixth consecutive month and the 22nd time in the last 23 months. The overall economy continued in expansion for the 53rd month after one month of contraction in April 2020. The New Orders Index remained in contraction territory at 46.1 percent, 1.5 percentage points higher than the figure of 44.6 percent recorded in August. The Production Index reading of 49.8 percent is a 5.0-percentage point increase compared to August’s figure of 44.8 percent.

Chicago PMI – Released 9/30/2024 – Chicago PMI remained in contraction territory in September but increased to 46.6 points up from 46.1 points in August. The latest reading indicated that Chicago’s economic activity contracted for the tenth consecutive month in September. Chicago PMI has remained in contractionary territory for 24 of the past 25 months. In September order backlogs and employment improved slightly while supplier deliveries, new orders, and production reduced further. Also, prices paid remained elevated for the second consecutive month.

US Light Vehicle Sales – Released 9/27/2024 – U.S. light vehicle sales were at a seasonally adjusted annual rate (SAAR) of 15.210 million units in August.

Personal Income – Released 9/27/2024 – Personal income increased $50.5 billion (0.2 percent at a monthly rate) in August. Disposable personal income (DPI)—personal income less personal current taxes—increased $34.2 billion (0.2 percent). Personal consumption expenditures (PCE) increased $47.2 billion (0.2 percent).

Third Estimate of 2nd Quarter 2024 GDP – Released 9/26/2024 – Real gross domestic product (GDP) increased at an annual rate of 3.0 percent in the second quarter of 2024, according to the “third” estimate released by the Bureau of Economic Analysis. The GDP estimate released today is based on more complete source data than were available for the “second” and “advance” estimates.  In the “second” estimate, the increase in real GDP was 3.0 percent and in the “advance” estimate, the increase in real GDP was 2.8 percent. In the first quarter, real GDP increased 1.6 percent. The update primarily reflected upward revisions to private inventory investment and federal government spending that were offset by downward revisions to nonresidential fixed investment and exports. Imports, which are a subtraction in the calculation of GDP, were revised up. The increase in real GDP primarily reflected increases in consumer spending, private inventory investment, and nonresidential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased.  

Durable Goods– Released 9/26/2024 – New orders for manufactured durable goods in August, up six of the last seven months, increased $0.1 billion or virtually unchanged to $289.7 billion, the U.S. Census Bureau announced today. This followed a 9.9 percent July increase. Excluding transportation, new orders increased 0.5 percent. Excluding defense, new orders increased 0.2 percent. Electrical equipment, appliances, and components, up two of the last three months, drove the increase, $0.3 billion or 1.9 percent to $14.4 billion. Shipments of manufactured durable goods in August, down following two consecutive monthly increases, decreased $1.6 billion or 0.5 percent to $289.4 billion. 

New Residential Sales – Released 9/25/2024 – Sales of new single‐family houses in August 2024 were at a seasonally adjusted annual rate of 716,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. 

This is 4.7 percent below the revised July rate of 751,000 but is 9.8 percent above the August 2023 estimate of 652,000. The median sales price of new houses sold in August 2024 was $420,600.  The average sales price was $492,700. 

Consumer Confidence– Released 9/24/2024– Consumer Confidence decreased from 105.6 to 98.7 in September.The expectations index declined 4.6 points to 81.7. Consumer confidence dropped in September to near the bottom of the narrow range that has prevailed over the past two years. September’s decline was the largest since August 2021 and all five components of the Index deteriorated. Consumers’ assessments of current business conditions turned negative while views of the current labor market situation softened further. Consumers were also more pessimistic about future labor market conditions and less positive about future business conditions and future income.

Existing Home Sales– Released 9/19/2024 – Existing home sales in August decreased 2.5% from July and fell 4.2% year over year. Existing home sales decreased to 3.86 million in August seasonally adjusted. The median price of existing homes for sale increased to $416,700, up 3.1% from one year ago.

Housing Starts– Released 9/18/2024 – August housing starts came in at 1,356,000, 9.6% below the July estimate and is 3.9% above the August 2023 rate. Building permits were 4.9% above the July rate at $1,406,000 but is 6.5% below the August 2023 rate. 

Industrial Production and Capacity Utilization – Released 9/17/2024 – Industrial production increased 0.8% in August after falling 0.9% in July. Manufacturing increased 0.9%. Utilities output was flat. Mining increased 0.8%. Total industrial production in August was the same as its year-earlier level. Capacity utilization increased to 78.0% in August, a rate that is 1.7% below its long-run average.

Retail Sales – Released 9/17/2024 – Headline retail sales were up 0.1% in August and are up 2.1% above August 2023.

This week we get data on Retail Sales, Industrial Production and Capacity Utilization, and Housing Starts.

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Data Sources: 

Conference Board Economic Indicators   Bureau of Economic Analysis (BEA)   Congressional Budget Office (CBO)     U.S. Bureau of Labor Statistics (BLS)    Federal Reserve Economic Data (FRED Charts)

CME Fed Watch   U.S. Treasury – Yields   U.S. Census Bureau    Institute for Supply Management (ISM)    Weekly DOL Employment Data    BLS Monthly Jobs Report    JOLTS      All capital in one visualization 2020

US Energy Admn (EIA)   BLS Consumer Price Index CPI      BLS Producer Price Index PPIAtlanta Fed GDPNOW    NY Fed Nowcast GDP     US Census Bureau Housing Starts   U.S. Energy Admn

Consumer Credit  USCB Retail Sales   Construction Spending      Federal Reserve Dot Plots 2017   NY Empire Index    Philadelphia Federal Reserve   P/E Ratio Data -Yardeni Research

Technical Analysis Info: Koyfin.com  StockCharts.com – Financial Charts    Exponential vs Simple Moving Average

Other links: 1973 Arab Oil Embargo    Hunt Brothers Silver    Asian Contagion   Long-Term Capital bailout