Weekend Update, October 7th, 2024

Index, Sector & Asset Performance

The S&P 500 closed the week at a new weekly all-time high close, on the back of “first blush” stronger than expected BLS jobs report which came in at 254,000 (150,000 expected) and the unemployment rate dropping. A government jobs report that will likely be revised lower materially, as has been standard for almost 15 months now, in 2025. Treasury yields rose sharply in the wake of normally seasonally stronger October data which reduced the odds of rapid Fed easing fand interest rate cuts for now. Equity prices managed to tick up on the week with the Dow Jones up +0.1%, S&P 500 up +0.2%, and NASDAQ Composite +0.1%). The “Soft Landing” (lower inflation, stable growth) “Goldilocks” scenario for the economy remains in play.

The most meaningful trading day last week was Friday post jobs report. US equities rallied on Friday after the September jobs report beat expectations. Large cap stocks lagged small cap stocks with the S&P 500 up +0.90% versus the Russell 2000 up +1.50%. In international markets, the MSCI Emerging Markets (EEM) and MSCI EAFE (EFA) rose +0.92% and +0.58% respectively.

Reflecting the stronger data, Financials led gains on the day up +1.64% and consumer discretionary were a close second up +1.62%. Interest sensitive groups like real estate lagged -0.65% and utilities -0.17%. JPMorgan and American Express led the Dow higher, while Home Depot and Verizon were the worst performers. The Nasdaq rose +1.22% with technology adding +1.11% on the day. Large cap tech stocks mostly rose led by Meta +2.26%, Amazon +2.50%, Apple +0.50%, and Alphabet +0.81%.

Treasury bond prices fell, and yields rose. Yields rocketed along the Treasury curve. Rate increases ranged from 16 bps for 30-year bonds to +38 bps for 2-year notes, which hit 3.91%. Three weeks ago, markets were pricing in over +250 bps of rate cuts by the end 2025. With the normal seasonal economic data uptick, Fed rate cut expectation have moved to +150 bps. The 10-year Treasury ended the week at the high of 3.96%, up +35 bps from its low in mid-September.

The surge higher in Chinese stocks continued for a second week, even though most markets were closed there for holiday. Overall, Chinese equities are up +37% off their lows and are now outperforming the S&P500 for the year.

Economic Indicators and Earnings Commentary

In addition to the better than forecast BLS jobs data, job openings surprised to the upside. JOLTS job openings beat with an +8 million reading in August, vs +7.7 million expected. ISM business sentiment indicators showed manufacturing still in contraction at 47.2 in September. Services sector sentiment improved to 54.9 vs 51.5 previously. The adjusted jobs data is covered here.

This is the last week of relatively little earnings news before the 3q24 reporting season ramps with financials and staple stocks first to release. Here is Goldman Sachs view of upcoming earnings season in one table:

 

Global Market Trends/Commodities/Currencies

Crude prices surged after Iran attacked Israel directly with over 200 ballistic missiles. The attack represented a significant escalation in Middle East tensions raising the prospect of Israel retaliating by targeting Iranian oil infrastructure. Crude will continue to be highly sensitive to developments in the Middle East as well as China stimulus.

In the Gold markets, the price of an ounce pulled back from recent highs on the back of a stronger UD dollar.

The U.S. dollar index (DXY) gained +1.6% on the week on the back of stronger US data and additional global easing moves elsewhere such as China.

OHFG Exclusive Data & Charts: Historical Pre and Post Presidential Election market moves. Countdown is On.

Oak Harvest Weekly Stock Talk: S&P 500 Bull Market Runs On. The Most Hated Bull Market Ever