Weekend Update, September 9, 2024

Index, Sector & Asset Performance

Entering September, the historically worst month of the year for equities, on a “normal” down note, the S&P 500 declined -4.25% last week. The four previous years S&P 500 September returns came in at 2023, -4.9%, 2022, -9.3%, 2021, -4.8%, and 2020, -3.9%. Marking the worst week since March 10, 2023, the Dow Jones Industrial Average also fell -2.9% on the week and the Nasdaq sank -5.8%, its worst week since Jan. 21, 2022.

Over the weekend, the folks running the most important equity index in the world, S&P 500, announced the additions of Palantir (PLTR) and Dell Technologies (DELL) to that S&P 500 index.

For the first time since July 1, 2022, the 2’s to 10’s interest rate yield curve finished a day uninverted last week. The yield on the 2-year Treasury note was down to 3.651%, while the 10-year yield was down to 3.71%. With the 10-year yield finally higher than the 2-year yield, it snaps the longest inversion on record at 545 trading days, according to Dow Jones Market Data.  This has historically been a leading indicator for a much weaker economy in out quarters.

Economic Indicators & Earnings Commentary

Last week a host of widely watched economic data all missed economic estimates including, ADP jobs data, BLS employment statistics, ISM manufacturing data, and the JOLTS job openings report leading to a selloff in equities and rally in bond yields. While most data have been weaker than forecast, the debate remains around is the Federal Reserve too late in cutting rates? And will they cut 25bps or 50bps at the meeting and will it matter?

This Wednesday the CPI report is one of the last key indicators before the September 17-18 FOMC meeting.  Traders are increasingly betting on a greater than 25bps rate cut at the meeting.

Vice President Harris and former President Trump will meet for the first time as they debate on Tuesday (9 pm) for their only scheduled meeting. Both candidates are talking about higher costs for US consumers as Harris has pledged to raise taxes on more “wealthy” Americans while Trump is pledging higher tariffs including a ‘100% Tariff’ for countries that shun the dollar. FWIW tariffs, in every form, are taxes on US consumers.

Global Market Trends/Commodities/Currencies

Global equities lost -3.7% last week, higher risk assets leading losses and with safe assets outperforming. Staples and utilities outperformed while technology and energy were the worst groups on the week.

China’s CSI 300 was down -1.2% this Monday on the back of weaker data. Over the weekend; China’s CPI missed expectations rising 0.6% y/y in August, the sixth gain in a row. Food costs jumped 2.8% y/y. Deflation in China is getting worse and there is little if any pricing power. Producer prices fell -1.8% y/y in August, worse than expected and on the heels of the prior month’s 0.8% y/y decline. The Japanese Nikkei slipped -0.5% on weaker-than originally expected economic growth.  These data points support weaker inflation globally which is good, but also weaker end demand which is bad.

Oil prices fell again last week on weaker economic data.

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