Weekly Market Report: September 27th, 2024
A busy economic calendar, Chinese policy support, and FedSpeak were enough to propel the S&P 500 (+0.62%) and NASDAQ (+0.95%) to a third consecutive week of gains. Emerging markets rallied 6.5% on a package of Chinese stimulus measures while developed international markets rallied 2%, thanks in part to a weakening USD. Bond yields were mixed with the curve steepening as longer maturities rose slightly and shorter maturities fell 15bps reflecting more dovish monetary policy.
Market Anecdotes
- China announced a range of measures to support its stock market and economy including lowering mortgage rates, policy rates, and down payment requirements. Additionally, a surprise Politburo meeting addressed fiscal and housing market initiatives and the PBoC expanded allowable collateral for stock market investing. Implications are wide ranging.
- Of note is that oil markets have been on the outside looking in on the rally in global growth sentiment, particularly given this week’s developments in China. Supply side dynamics of OPEC+ and U.S. production are likely culprits to the decline in oil prices to nearly three-year lows.
- The key FOMC policy question with significant implications for equity and bond markets is how fast and how deep does the rate cut cycle develop with data on inflation dynamics and labor market conditions the primary drivers.
- Last week’s bond market reaction to the 50bps FOMC rate cut caught our attention as yields moved slightly higher (inflation risk) as opposed to trending lower (‘behind the curve’ risk).
- Several FOMC speaking engagements last week were focused on defending the 50 bps rate cut due to concern with downside risks to the labor market.
- A potential dockworkers’ strike at 36 U.S. ports receiving over 40% of inbound container volume poses a material short-term risk to supply chains and inflation dynamics.
- Annual BEA data revisions have taken GDP growth notably higher but maybe more importantly, savings rates also notably higher.
- Easier monetary policy and soft landing traction are key contributors to the broader risk on sentiment in markets with soft inflation data and healthy GDP forecasts paving the way.
- The biggest geopolitical concern today is significant escalation in the Middle East including sustained direct or proxy Israel-Iran conflict on which Alpine Macro is placing a 60% likelihood.
- The latest on POTUS election probabilities is best described as trending toward a Harris win but overall, too close to call. Betting markets (52%-47%), FiveThirtyEight polls (48.3%-45.6%), Silver Bulletin (dead heat), and Silver Bulletin (electoral college 53.7%-46.0%) slightly favor Harris.
Economic Release Highlights
- The September release of PCE inflation saw headline (2.2% vs 2.3%) coming in slightly below and core (2.7%) in line. MoM inflation registered 0.1% for both headline and core with the former in line and the latter slightly below estimates.
- Personal income growth of 0.2% and Personal Consumption Expenditures of 0.2% both came in below estimates and registered at the low end of the forecast range.
- September U.S. PMIs (C,M,S) registered 54.4, 47.0, 55.4 where the Composite came in ahead of forecast and relatively in line with prior month while services beat consensus (55.2) and manufacturing missed (48.5).
- Non-U.S. PMIs (C,M,S) in September include Eurozone (48.9, 44.8, 50.5), U.K. (52.9, 51.5, 52.8).
- Durable Goods Orders for August came in above forecast with New Orders (0% vs -2.7%), Ex-Transportation (0.5% vs 0%), and Core Capital Goods (0.2% vs -0.2%) all beating estimates.
- Conference Board Consumer Confidence Index declined to 98.7 in September from 103.3 prior month and well below the spot consensus of 103.0
- The Case-Shiller Home Price Index appreciated 0.3% MoM and 5.9% YoY, in line with forecasts.
- New Home Sales for August of 716k were slightly above the consensus forecast of 700k. Pending Sales grew 0.6%, slightly below consensus estimate of 3.1%
This communication is provided for informational purposes only and is not an offer, recommendation or solicitation to buy or sell any security or other investment. This communication does not constitute, nor should it be regarded as, investment research or a research report, a securities or investment recommendation, nor does it provide information reasonably sufficient upon which to base an investment decision. Additional analysis of your or your client’s specific parameters would be required to make an investment decision. This communication is not based on the investment objectives, strategies, goals, financial circumstances, needs or risk tolerance of any client or portfolio and is not presented as suitable to any other particular client or portfolio.
