Market Update: October 7, 2024
Economic data for the week included ISM manufacturing data coming in unchanged, and still contractionary, while ISM services improved further into expansion. Friday’s employment situation report came in far better than expected, in higher nonfarm payrolls and a drop in the unemployment rate.
Equities were mixed globally with gains in the U.S. and China, while other developed and emerging countries saw declines. Bonds fell back generally with higher interest rates. Commodities rose with a sharp gain in crude oil along with Middle East concerns.
U.S. stocks were mixed early in the week, with decent economic data coupled with Fed Chair Powell again reiterating in a high-profile speech that “more cuts” would be coming, but also downplaying the speed, as the FOMC is “not a committee that feels like it’s in a hurry to cut rates quickly.” This appears to have disappointed markets a bit. The East and Gulf Coast port strike also raised the likelihood of a negative impact on near-term GDP by at least a few tenths of a percent if it went on for a few weeks (although a temporary agreement was reached by Thurs.). By week’s end, the stronger-than-expected nonfarm payrolls report again pointed to a possible slower Fed rate cutting path, which was felt in interest rates more than it was in equities (with the offsetting story of still-strong economic growth a likely positive).
Sector results were mixed, with energy leading the way with a 7% gain on the heels of rising oil prices tied to the Middle East conflict, followed by financials, utilities, and communications which each gained about a percent. Losing groups included materials, consumer staples, and consumer discretionary, which lost over a percent each. Real estate also declined nearly -2% as interest rates ticked higher by the end of the week in response to stronger employment data.
Foreign stocks were mixed, with gains in Japan and emerging markets offset by declines in Europe and the U.K., with pressure lower from a strong U.S. dollar, in addition to weaker economic indicators, and the Middle East concerns nearby. In emerging markets specifically, China continued a sharp rally of over 10% on optimism generated the prior week from government stimulus; most other key EM nations fell back on the week, such as South Korea, Taiwan, and Turkey, in keeping with the dollar strength.
Bonds lost ground for the week, notably by Friday as the strong employment situation report raised odds of a stronger economy and tempered chances for deeper Federal Reserve rate cuts in the near term. Senior floating rate bank loans fared better, with gains, as would be expected. The stronger U.S. dollar pulled down returns for foreign bonds, especially in emerging markets.
Commodities rose for the week, led by energy, while other segments were little changed. Crude oil prices rose over 9% last week to $74/barrel, having climbed steadily throughout the week, following Iran’s missile barrage on Israel and President Biden’s hints about the targeting of Iranian oil facilities. While oil remains sensitive to Middle East geopolitical tensions, it has been less so in the recent conflict, although several areas remain vulnerable—notably Strait of Hormuz shipping routes and Iranian production—the latter of which that could be affected by any Israel targeting. As it stands now, weak Chinese demand and ample inventories elsewhere have outweighed these concerns.
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.