Weekly Market Report: October 18th, 2024
Markets last week took in an early leg of third quarter earnings reports, several policy announcements, and a small but somewhat encouraging roster of economic reports. Domestically, the S&P 500 (+0.85%) closed higher for a sixth consecutive week and small caps continued to shine, closing up 2% on the week. Developed and emerging international markets both closed down by 0.44% and 0.95%, respectively thanks in part to continued strength in the USD. Bond yields stayed relatively flat with 2yr and 10yr yields closing at 3.95% and 4.08%, respectively. Crude oil fell back below the $70 level last week to close at $69.35.
Market Anecdotes
- Early stages of third quarter earnings are getting off to a mixed beginning with above average beats but below average beat margins. Blended earnings and revenue growth rates are currently at 3.4% and 4.7%, respectively.
- Recent price action across small cap U.S. stocks may reflect an increasing probability of the soft landing scenario taking shape.
- Continued strength in various economic reports has taken the Atlanta Fed GDPNow forecast for 3Q GDP up to 3.4%, well above the generally expected potential growth rate of 2.0%-2.5%.
- Pricing across Morningstar high yield distressed bond data reinforces the idea that credit markets do not see reason for concern based on trends in the numbers, size, and quality of issuers in the space.
- Last week markets received details on various support measures from the PBOC, MoF, and Housing Ministry in China that seem to have impacted the domestic stock market more so than the economic growth outlook.
- Eleven Fed speaking engagements last week served to guide markets toward a more hawkish stance with regard to expected future monetary policy moves.
- The ECB delivered what markets were expecting, a third 25 bps rate cut to the refi and deposit rates, taking them down to 3.4% and 3.25% respectively. Meanwhile, the BoJ has retreated from their brief window of hawkish policy, with the Yen weakening accordingly.
- Updates on U.S. election predictions from our research outlets are seeing an increasing likelihood of a Trump victory, heightening the specter of unified control in DC.
Economic Release Highlights
- Retail Sales in September came in above consensus forecasts for Headline (0.4% vs 0.3%), ex-Vehicles (0.5% vs 0.1%), and ex-Vehicles & Gas (0.7% vs 0.3%).
- Industrial Production in September came in below the spot forecast (-0.3% vs -0.1%) and saw both manufacturing output and capacity utilization come in under consensus.
- The Housing Market Index for October registered 43, slightly under the expected forecast of 42.
- Housing Starts (1.354M vs 1.400M) and Permits (1.428M vs 1.500M) both came in slightly below their respective consensus forecasts.
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