November 3, 2024
Volume11, Issue 44
Weekly Recap
The major equity indexes finished mostly lower over a particularly busy week on the macro (economy) and micro (earnings) fronts. The technology-oriented Nasdaq Composite and S&P MidCap 400 each reached record intraday all-time highs on Wednesday before falling back sharply on Thursday. Growth stocks generally lagged value shares, due partly to cautious earnings reports from Facebook parent Meta Platforms and software giant Microsoft. Small-caps also held up much better than large-caps. Roughly 42 percent of the companies in the S&P 500 reported third-quarter earnings last week, including five of the so-called Magnificent Seven mega-cap technology-oriented stocks: along with Meta and Microsoft, Google parent Alphabet, Apple, and Amazon. As of Friday, analysts polled by FactSet were expecting overall earnings for the S&P 500 to have increased by 5.1 percent versus the same quarter a year ago. This would mark a faster pace of growth than what was expected before the start of reporting season, when analysts expected earnings to grow by 4.3 percent.
Last week also brought several closely watched economic reports. The week’s labor market data drew particular attention, although it arguably sent some widely divergent signals. On Tuesday, the Labor Department reported that the number of job openings had fallen to 7.44 million in September, its lowest level since January 2021. The number of Americans leaving jobs remained relatively unchanged, however, with the number of those quitting voluntarily – seen by some as a better measure of labor market conditions – also staying roughly steady.
As was widely expected, last month’s payroll data appeared “noisier” given the disruptions in October from Hurricanes Helene and Milton in the South and the strike by Boeing workers that began on September 13. On Wednesday, private payrolls firm ADP surprised markets by announcing that its tally of private-sector jobs had expanded by 233,000 in October, roughly twice consensus estimates.
On Friday, however, the Labor Department reported that, overall, nonfarm payrolls were “essentially unchanged” over the month, with employers adding only 12,000 jobs, the lowest number since December 2020. The department noted that the impact reflected a decline of 44,000 jobs in transport equipment manufacturing activity due to the Boeing strike, while little or no growth in employment in other major industries failed to compensate for the weakness. Nonetheless, average hourly earnings grew by 0.4 percent in October, a tick more than expected.
Friday also brought news that the Institute for Supply Management’s gauge of manufacturing activity had declined unexpectedly for the seventh straight month to 46.5, its lowest level in 15 months. “Demand remains subdued,” the Institute’s chair noted, “as companies continue to show an unwillingness to invest in capital and inventory due to concerns (for example, inflation resurgence) about federal monetary policy direction in light of the fiscal policies proposed by both major parties.” Indeed, the weak manufacturing and payroll reports failed to prevent the yield on the benchmark 10-year U.S. Treasury note from moving to another four-month intraday high (4.37 percent) on Friday, perhaps in response to expectations for an eventual renewal inflation and growth pressures.
Market Monitor
A full listing of market performance data is available here.
DQYDJ.com (“Don’t Quit Your Day Job”) offers helpful investment calculators here, including one that shows total returns for individual stocks. Koyfin.com provides reams of data on individual stocks, including the ability to track total return — and just about anything else — over time.
In the News
Job growth slowed sharply last month, with workers sidelined by hurricane effects and the continuing Boeing strike. The Labor Department on Friday reported that the economy added a seasonally adjusted 12,000 jobs in October, versus a September gain of 223,000. Economists polled by The Wall Street Journal, anticipating storm and strike effects, expected a gain of 100,000. The unemployment rate stayed steady at 4.1 percent, in line with economists’ expectations.
In the week ending October 26, the advance figure for seasonally adjusted initial jobless claims was 216,000, a decrease of 12,000 from the previous week’s revised level. The previous week’s level was revised up by 1,000 from 227,000 to 228,000. The 4-week moving average was 236,500, a decrease of 2,250 from the previous week’s revised average. The previous week’s average was revised up by 250 from 238,500 to 238,750.
The Federal Reserve’s preferred measure of underlying U.S. inflation posted its biggest monthly gain since April, bolstering the case for a slower pace of interest-rate cuts following last month’s outsize reduction. The so-called core personal consumption expenditures price index, which strips out volatile food and energy items, increased 0.3 percent in September, and 2.7 percent from a year earlier, according to Bureau of Economic Analysis data out Thursday. Overall inflation was 2.1 percent, the lowest since early 2021 and just above the central bank’s 2 percent goal.
On Tuesday, a surprise slide in job openings was offset by a jump in consumer confidence. Despite generally stronger-than-expected economic data since the Federal Reserve cut interest rates in mid-September, traders are clinging to wagers on a quarter-point reduction at next week’s Fed meeting.
The Commerce Department reported Wednesday that early estimates show real U.S. gross domestic product – adjusted for inflation – grew at an annual rate of 2.8 percent in the third quarter of 2024, down from 3 percent annual growth in the second quarter of the year. Consumer spending increased 3.7 percent from Q2 to Q3, according to the estimate, accounting for much of the GDP growth. Big Tech’s earnings are mostly not that magnificent.
Charts of the Week
I found the following articles to be of note. Some may be of interest only to advisors while others are aimed more broadly. You may hit paywalls below; many can be overcome here.
- Before You Quit (Jonathan Clements)
- The True Tax Benefit of IRAs and 401(k)s (John Rekenthaler)
- A Q4 Checklist for Retirement Savers (Christine Benz)
- What I’ve Learned About Retirement (Fritz Gilbert)
This is the best thing I have read recently. The oddest. The most horrific. The most insightful. Crows. Mind blown. Idiots.
October is historically the most volatile month, but not 2024 (see below). Not a single 1 percent close (up or down) all month. Past 50 years that only happened in 2017 and 1995. That’s it. It is also one of the least volatile Octobers in an election year ever. Average intraday range for S&P 500 has been 0.79 percent this October, which is the second smallest range going back more than 50 years.
“I give myself sometimes admirable advice, but I am incapable of taking it.”
~ Mary Wortley Montagu
Securities and advisory services are offered through Madison Avenue Securities, LLC, a member of FINRA and SIPC, a registered investment advisor. This report provides general information only and is based upon current public information we consider reliable. Neither the information nor any opinion expressed constitutes an offer or an invitation to make an offer, to buy or sell any securities or other investment or any options, futures, or derivatives related to such securities or investments. It is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation, and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities, other investment, or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Investors should note that income from such securities or other investments, if any, may fluctuate and that price or value of such securities and investments may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. Diversification does not guaranty against loss in declining markets. Madison Avenue Securities, LLC | 13500 Evening Creek Drive N, Suite 555 | San Diego, CA 92128 US
