Weekend Update, October 21st, 2024

Index, Sector & Asset Performance

The S&P 500 closed the week with its 6th straight up week closing on Friday at another new all-time high, 5864. Since their July 4th weekend relative strength peak, the influence of the “Magnificent 7 companies” has waned but has still driven more than +40% of the S&P 500’s +22% year-to-date return. For the week, the S&P 500 ended the week +0.87% higher. According to Morningstar, the Vanguard S&P 500 ETF has attracted $71 billion in net inflows over the first nine months of this year. This inflow beats the record the SPDR S&P 500 ETF Trust set in 2023 by $20 billion.

Interest rate-sensitive sectors, “boring”, such as real estate, utilities, and consumer durables led the way, and energy and health care lagged. Negative results from ASML sent semiconductor stocks down but gains from the “n’s”, Nvidia and NFLX were able to keep the Nasdaq strong.

Financials, banks, brokers, and insurers kicked off 3q24 earnings in a positive fashion, as capital markets and wealth management-focused results from firms like Morgan Stanley, Blackrock, and Goldman Sachs combined with earnings beats from banking titans JP Morgan and Wells Fargo to push the group higher sector. Earnings season accelerates this week. Per Goldman Sachs data:

Internationally, Chinese stocks fell –2.84% and have now retraced half of their stimulus-fueled rally.

In the bond markets, 2-Year and 10-Year US Treasury yields remained flat at 3.95% and 4.07%. Markets are expecting a quarter point rate cut at the November 7 FOMC meeting.

Economic Indicators and Earnings Commentary

Better than expected consensus retail sales figures at +.7% point to a more gradual pace of monetary easing ahead. Core retail sales fell at electronics and furniture stores but rose in every other store category. The Philadelphia Fed manufacturing index increased by 8.6pts to +10.3 in October. The print was mixed-to-strong, with increases in the shipments and new orders components and declines in the employment component.

Atlanta Fed’s Q3 GDP Now estimate was pushed up to 3.4%. Disruptions from the hurricanes and the Boeing strike offsetting stronger service numbers. Initial jobless claims fell to 241,000 from 260,000 previously, also impacted by the natural disasters hitting multiple southern states.

Global Market Trends/Commodities/Currencies

Crude prices fell again last week, -8%, with lower concerns that the Middle East will materially disrupt supply. WTI and Brent crude finished the week lower at $69.22 and $73.06/bbl. This happened even with positive dynamics of falling crude oil stockpiles in the US and higher industrial production activity in China. U.S. crude production hit a fresh all-time high of 13.5 mmbpd.

The price of gold posted its sixth consecutive week of gains and broke through $2,700 for the first time, ultimately ending the week at $2754.30/troy oz. This extends its gain to almost 40% year on year in line with the SP500.

The U.S. dollar index (DXY) strengthened against last week. The US dollar index rose by +0.67%. The Chinese Yuan weakened against the dollar last week despite better-than-expected economic growth in the third quarter.

Per Goldman Sachs:

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