Market Update: October 14, 2024
Economic data for the week included consumer inflation coming in better on the headline side, but remaining sticky on the core side, while producer prices continued to show moderation. Jobless claims rose following consecutive hurricanes impacting the Southeastern U.S.
Equities were mixed globally last week, with gains in the developed world and declines in emerging markets, due to varying economic results and central bank policy expectations. Bonds pulled back as yields moved higher along with sticky inflation. Commodities were mixed, with oil prices ticking a bit higher but industrial metals down.
U.S. stocks reached new record highs again last week. Sector results were mixed, with technology and industrials leading with gains of over 2% for the week, followed by financials, while utilities pulled back by over -2%. Real estate saw a small decline, as interest rates ticked upward a bit. In the closely-monitored tech and communications segment, strength in NVIDIA offset a decline in Alphabet/Google, as it appears the Department of Justice is considering a legal push for a breakup of the company. Tesla also fell back by double digits as investors appeared less impressed with the lack of detail concerning their new ‘robotaxi’ products.
Earnings season for Q3 has begun, with a handful of S&P 500 companies having reported. Per FactSet, earnings growth expectations for the quarter are currently at 4.1%, although upward revisions of a few percent have been the norm for recent quarters. Q3 features expected leadership again from technology, communications, and health care—expected to run at 10-15% growth rates—while laggards include energy (-24%) and materials (-4%), based on the difficult commodity pricing environment. Revenue growth is expected to come in at a year-over-year pace of 4.6%, with overall S&P profit margins continuing to exceed a historically-high 12%.
Foreign stocks were down on net, with a gains in Europe and Japan offset by declines in U.K. and emerging markets. The U.K. appeared to reverse back into showing positive economic growth, while trade-focused Germany showed deterioration, although both rounded to just a few tenths above or below zero. Emerging markets stocks were driven downward by a declines of around -5% in China. After a strong two weeks, stocks there fell back due to a lack of clarity on announced fiscal stimulus measures, as markets were dubious of sufficiency and timeline. It’s assumed that added measures, and a speed-up in spending of earlier announced stimulus, will be required to make progress in moving the economy closer to 5% GDP growth goals and moving consumers out of their pessimistic state. Announcements last week were lackluster (with another planned for Sat.), although many of the problems the government are attempting to solve are not easily done so through macro stimulus, as opposed to targeted activities.
Bonds pulled back as interest rates moved up along the intermediate- and long-term parts of the U.S. Treasury curve, along with a sticky CPI report that cast further doubt on the Federal Reserve cutting rates by more than a quarter-percent at the November meeting. Floating rate bank loans outperformed, eking out a small gain, in contrast to traditional bonds. Foreign bonds also fared negatively, along with the headwind of a stronger dollar.
Commodities were mixed, with gains in energy and precious metals offset by declines in agriculture and industrial metals (the latter tied to sentiment around China). Crude oil prices rose nearly a percent last week to $76/barrel, with continued offsetting supply and demand impacts keeping volatility in check.
The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness. All information and opinions expressed are subject to change without notice. Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.