October 13, 2024
Volume 11, Issue 41
Weekly Recap
The S&P 500 closed last week at another all-time high, its 45th of 2024. The Dow and the S&P MidCap 400 also moved to record highs over the week, aided by some upside surprises to kick off earnings season. Shares in JPMorgan Chase and Wells Fargo rose on Friday after the banking giants reported smaller-than-feared declines in third-quarter profits, while the former managed a small increase in revenues.
A solid rise in NVIDIA shares helped growth stocks outperform value stocks last week and compensate for a decline in Google parent Alphabet, following reports that the Justice Department was considering asking a federal judge to order a breakup of the company. Tesla was also weak following a skeptical response to the company’s highly anticipated unveiling of its new “robotaxis” and “robovans.” The earnings focus seemed to offset several disappointing economic reports last week. On Thursday, the Labor Department reported modest upside surprises in headline and core (ex-food and energy) inflation, which rose in September by 0.2 percent and 0.3 percent, respectively, both a tick above expectations. On a year-over-year basis, core prices increased 3.3 percent in September versus 3.2 percent in August, marking the first increase since March 2023. Sharp increases in the seasonally adjusted prices of medical care (up 0.7 percent) and transportation (up 1.4 percent) services offset a 1.9 percent decline in energy prices.
Also on Thursday, the Labor Department reported a surprise jump in weekly jobless claims to 258,000, the highest level in 14 months. While disruptions from Hurricane Helene were partly to blame, Michigan also recorded substantial job losses. Continuing claims also rose to their highest level (1.86 million) since late July. Relatedly, perhaps, the University of Michigan’s preliminary gauge of consumer sentiment in October fell back unexpectedly as those surveyed expressed more caution about their personal finances.
The upside consumer inflation surprise led to a significant change in expectations for the Federal Reserve’s next policy meeting in November, with futures markets ending the week pricing in a decent (14.1 percent) chance of the Fed keeping rates steady, according to the CME FedWatch Tool. Minutes from the Fed’s last policy meeting, released Wednesday, also revealed that several members preferred only a 25-basis-point (0.25 percentage points) rate cut as opposed to the 50-basis-point cut announced despite only one member officially dissenting. Long-term bond yields also rose in the wake of the inflation data, with the yield on the benchmark 10-year U.S. Treasury note hitting its highest intraday level (4.12 percent) since July 31.
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
U.S. inflation eased to a new three-year low but is cooling more slowly than expected, new data showed. The consumer-price index rose 2.4 percent from a year earlier in September, the Labor Department said Thursday, after rising 2.5 percent in August. That was higher than the 2.3 percent rise that economists polled by The Wall Street Journal had expected. Core prices, which exclude volatile food and energy items, climbed 3.3 percent over the previous 12 months, slightly hotter than the 3.2 percent rise in August. That was also above expectations.
Federal Reserve officials were divided at their meeting last month over how much to reduce interest rates, with a substantial majority favoring the larger half-percentage-point reduction that was ultimately approved, but others favoring a smaller quarter-point cut. Minutes from the September 17-18 meeting, released Wednesday, pulled back the curtain on deliberations over why officials chose to make their first rate reduction since 2020 with a bolder half-point move. Bottom line: After the September jobs report, another jumbo cut from the Fed is highly unlikely.
U.S. consumer confidence declined less than a month before the presidential election, an unexpected downturn after two months of gains. Producers’ selling prices stayed flat in September, more evidence of cooling U.S. inflation.
In the week ending October 5, the advance figure for seasonally adjusted initial jobless claims was 258,000, an increase of 33,000 from the previous week’s unrevised level of 225,000. This is the highest level for initial claims since August 5, 2023 when it was 258,000. The 4-week moving average was 231,000, an increase of 6,750 from the previous week’s unrevised average of 224,250.
The Federal Reserve cut interest rates, then mortgage rates went up. That is a reminder of the complexity of mortgage pricing – and a warning that lower rates from here are not a foregone conclusion.
A stunning 33 percent of voters believe we’re in a recession. We aren’t. Not even close. In fact, this immovable object (U.S. economic growth) is thwarting the irresistible force of geopolitical risk, at least for now.
For optimism on U.S. Treasury securities, look at mortgage rates. For pessimism, contemplate the deficit. The median age of all U.S. homebuyers is now 49 years old, up from 31 in 1981.
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.
- The Rally is Broadening (Michael Batnick)
- Earnings Dominate (Sam Ro)
- Defining Bull and Bear Markets (Ben Carlson)
- Helping Nervous Clients Understand The (True) State Of The Social Security System And What It Means For Their Retirement (Michael Kitces)
- The Noise Factory (Joe Wiggins)
This is the best thing I’ve read recently. The saddest. The most insightful. Make your own podcast – on demand. Twitter is worth 80 percent less than when Elon Musk bought it. Lovely. True.
The 55.8 million Americans over 65, about 17 percent of the population, hold half of America’s wealth – $96.4 trillion.
“If you spend so much time getting rich but never enjoy being rich – are you even rich?” ~ Noah Kagan
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
