Market Update: October 28, 2024
Economic data for the week included a decline in overall durable goods, mixed results in housing sales, as well as higher continuing jobless claims, due to a variety of weather and labor issues.
Equities declined globally, with higher interest rates and less certainty about central bank rate easing looking forward. Bonds fell back along with rising yields at the longer end of the curve. Commodities gained, largely due to energy, despite a stronger dollar.
U.S. stocks lost ground for the first time in six weeks, as higher interest rates associated with an assumed more drawn-out Fed rate cut cycle and perhaps higher future deficits post-election weighed on sentiment. By sector, consumer discretionary experienced a percent gain (led by a 20%+ return for Tesla, upon better than expected earnings and vehicle sales projections) and a small gain for technology, while negativity was most pronounced in materials, industrials, and health care. Large cap fared better than small cap. Real estate fell about -2% upon the rise in yields.
A good deal of speculation is continuing based on the potential outcome of the Nov. 5 election. Typically, pre-election weeks have experienced a higher degree of volatility, particularly in close races. The good news is that post-election rallies have also been historically frequent, as have a tendency of November and December to be two of the best-performing months of the year—of course, such historical tendencies are never guaranteed in any given single year.
Per FactSet, 37% of companies in the S&P 500 have now reported Q3 earnings, bringing the total year-over-year blended growth rate down almost a percent from quarter-end to 3.6%, though revenue growth has ticked up a few tenths to 4.9%. Earnings growth gains continue to be led by technology and communications (up in the double-digits), with energy earnings now having weakened to -27%. The year-over-year comparative is assumed to significantly improve by Q4, with expected market earnings growth of over 13%, and over 15% expected for calendar year 2025, which has kept markets buoyant. A bulk of firms, including five of the Magnificent 7 report this coming week, which will provide more clarity on things.
Foreign stocks lost ground as well, with the added impact of a stronger U.S. dollar, up about a percent for the week. Japan underperformed, with Europe, U.K. and emerging markets faring slightly better. Sentiment largely was focused on the pace of U.S. Fed rate cut movements, as well as continued weak economic growth in Europe, yet more divisiveness over the pace of ECB policy easing.
Bonds lost ground as interest rates continued to tick upward, with floating rate bank loans the only winning sector. As noted, yields have been rising along with stronger economic and labor data, and perhaps what seem to be recently higher odds of a Trump election victory—with the implication being higher deficits and larger expected Treasury debt supply in coming years. Foreign bonds lagged, as the U.S. dollar gained.
Commodities gained despite the stronger dollar, led by energy, while precious metals were also higher. Crude oil prices rose over 4% last week to $72/barrel, with continued Middle East concerns and indications of some demand improvement.
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.