Weekly Market Report: October 11th, 2024
Markets last week kicked off a nice start to the third quarter earnings season and took in several key economic reports. U.S. equity market momentum continued with the S&P 500 marking a fifth consecutive positive week on top of notching its 45th record high for the year and its first close above 5,800. Developed (-0.30%) and emerging (-1.3%) international markets had to contend with nine consecutive days of a strengthening USD, posting slight losses on the week. Stocks have been resilient in the face of rising yields where we’ve seen the 10yr yield increase nearly 35 bps over the past eight sessions, leaving the 10yr handily over the 4% level, to 4.08%.
Market Anecdotes
- U.S. equity markets maintained their positive momentum, thanks in part to a constructive start to earnings season. Elevated global uncertainty and a notable move higher in bond yields have yet to capture investor attention in the short term.
- With third quarter earnings season now underway, companies in the S&P 500 are expected to grow the bottom line by 4.1% but factoring in historical beat margins, FactSet estimates growth rate will be closer to 9.5%-10%.
- Healthy growth dynamics and last week’s warmer than expected CPI report served to reduce odds of another 50 bps rate cut by the Fed next month.
- With the two-year anniversary of the bull market now in the book, Strategas highlighted the historically average performance of large caps (S&P 500 60.8% vs 60%) and historically below average performance of small caps (Russell 2000 29.9% vs 76.9%) with year 3 to be determined.
- BCA’s geopolitical research pointed out a Harris administration is much more likely to be gridlocked than a Trump administration with markets yet to price in the impacts of sharp immigration curbs, major tax cuts, or global trade wars.
- U.S. government spending increased 10% in FY 2024 while tax revenues increased 11% but the deficit increased by $139b, thanks to interest payments on outstanding debt increasing 34%.
- ETF fund flows show retail investors chasing the surge in China’s equity market with nearly $9b of inflows to China funds, well above the next highest inflow of $1.8b to investment grade credit.
- BCA noted China’s aggressive energy independence push toward nuclear energy poses risks to U.S. dominance in the space where China’s installed capacity just over the past 10 years represents nearly 50% of current installed U.S. capacity.
- A follow-up to last week’s musings about survey response rates and the prevalence of multiple job holders relative to its longer-term trend shows in fact, response rates have fallen and levels of multiple job holders are at their highest point dating back to 1995.
Economic Release Highlights
- The September CPI report came in a bit warmer than consensus forecast with YoY readings of Headline (2.4% vs 2.3%) and Core (3.3% vs 3.2%) and MoM readings of Headline (0.2% vs 0.1%) and Core (0.3% vs 0.2%).
- Headline PPI in September rose YoY (1.8% vs 1.6%) and MoM (0% vs 0.2%) while core readings were up YoY (2.0% vs 2.7%) and MoM (0.2% vs 0.2%).
- Consumer Sentiment declined slightly in October to 68.9 from 70.1 while 1-year ahead inflation expectations increased from 2.7% to 2.9%.
- The September NFIB Small Business Optimism Index was mostly flat versus the prior month at 91.5.
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