October 20, 2024
Volume 11, Issue 42
Weekly Recap
The S&P 500 moved higher last week, paced by the utilities and real estate sectors. Energy stocks pulled back in sympathy with oil prices, which retreated as fears of possible Israeli attacks on Iran’s oil and gas infrastructure subsided. Returns were stronger down the market cap spectrum, with the small-cap Russell 2000 and the S&P MidCap 400 outperforming. After lagging for much of the week, the Nasdaq Composite rallied Friday. Strong quarterly results from Taiwan Semiconductor Manufacturing, which operates foundries that make advanced digital semiconductors, appeared to reignite excitement for artificial intelligence related stocks. The tech-heavy benchmark also received a lift after some companies reported earnings that surprised to the upside. Netflix, for example, grew its subscriber numbers and expanded its operating margins by more than expected in the third quarter.
In an encouraging sign for third-quarter economic growth, the value of U.S. retail sales increased 0.4 percent last month, accelerating from the 0.1 percent uptick registered in August. The September reading was slightly above the consensus estimate for a 0.3 percent gain. Strength in consumer spending was broad-based: 10 of the 13 retailer categories reported higher sales for the month. A measure of retail sales that excludes auto dealerships, building materials, food services, and gas stations climbed 0.7 percent from the prior month—the fastest rate of growth in three months.
Industrial production dropped 0.3 percent in September after increasing 0.3 percent in the preceding month. The final number for August was revised downward from an initial estimate of 0.8 percent. The Federal Reserve attributed this weakness to Hurricanes Francene and Helene, along with an aircraft machinist strike at Boeing.
New applications for unemployment benefits spiked in the first week of October, in part, reflecting the damage and disruptions caused by Hurricane Helene across several Southeastern states in late September. However, initial jobless claims fell unexpectedly to 241,000 during the week ended October 12, a decline of about 19,000 filings. Meanwhile, the number of people receiving jobless benefits for more than one week increased by 9,000 to 1.867 million, falling short of a consensus estimate for 1.876 million. After decreasing through much of the week, yields on intermediate- and long-term bonds climbed on Thursday but fell again Friday on news that housing starts and the number of overall building permits both decreased in September. Week-over-week, U.S. Treasury yields were virtually unchanged.
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
American shoppers and diners closed out the summer without much sign of cutbacks – fresh evidence of how strong consumer spending has helped insulate the economy from a downturn. Sales for retailers and eateries grew by 0.4 percent in September from a month earlier, according to advance data from the Census Bureau, an acceleration from 0.1 percent growth in August and a higher pace than economists had been expecting. Restaurants and bars fared especially well last month, as did clothing stores, suggesting shoppers’ appetite to spend hasn’t yet been tapped out. Meanwhile, a weekly look at unemployment filings showed some continuing pain from hurricanes Helene and Milton – but few marks of a more serious downward spiral in the labor market. Together, the data add to a picture of a cooling but still-robust economy heading into a pivotal stretch for American business and politics: In less than three weeks voters will choose the next president and the Federal Reserve will decide whether to keep cutting interest rates.
Advance estimates of U.S. retail and food services sales for September 2024, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $714.4 billion, an increase of 0.4 percent from the previous month, and up 1.7 percent from September 2023. The July 2024 to August 2024 percent change was unrevised from up 0.1 percent. The U.S. Treasury market, world’s biggest, got hit as this solid report had traders trimming their bets on Federal Reserve rate cuts this year.
Industrial production decreased 0.3 percent in September after advancing 0.3 percent in August. A strike at a major producer of civilian aircraft held down total IP growth by an estimated 0.3 percent in September, and the effects of two hurricanes subtracted an estimated 0.3 percent. For the third quarter, industrial production declined at an annual rate of 0.6 percent. Manufacturing output moved down 0.4 percent in September, and the index for mining fell 0.6 percent. The index for utilities gained 0.7 percent. At 102.6 percent of its 2017 average, total industrial production in September was 0.6 percent below its year-earlier level. Capacity utilization edged down to 77.5 percent in September, a rate that is 2.2 percentage points below its long-run (1972–2023) average.
In the week ending October 12, the advance figure for seasonally adjusted initial jobless claims was 241,000, a decrease of 19,000 from the previous week’s revised level. The previous week’s level was revised up by 2,000 from 258,000 to 260,000. The 4-week moving average was 236,250, an increase of 4,750 from the previous week’s revised average. The previous week’s average was revised up by 500 from 231,000 to 231,500.
Americans have consistently given former president Trump better marks on the economy than President Biden, to the frustration of Mr. Biden’s advisers, who complain the president hasn’t gotten the credit he deserves. While recent polls suggest Vice President Harris is making up ground on the economy, she still trails. So just what does the data show on how Mr. Trump and Mr. Biden performed? Neither presidential candidate will reduce the deficit.
What 66 economists say about where the economy is headed, in charts. Why do some nations prosper while others are poor? To boil down this year’s economics Nobel to a single sentence: “Institutions matter.”
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 Laws of Financial Health (Mark Newfield)
- Can U.S. Investors Benefit from Global Diversification? (Lan Ahn Tran)
- Savers Bid a Sad Farewell to Higher Yields (Rachel Ensign)
- Against the Odds (Jacob Schroeder)
- Begin by Quitting (Sundar Mohan Rao)
This is the best thing I have read recently. The loveliest. The saddest. The scariest. The most depressing. This year’s batch of Nobel Prize winners are really readable! The economics of running a haunted house. The biggest win.
By a new rule released last week, the Federal Trade Commission will require venders to make it as easy to cancel a subscription as it is to sign up for one. In a statement, FTC chair Lina Khan explained the reasoning behind the “click-to-cancel” rule: “Too often, businesses make people jump through endless hoops just to cancel a subscription. Nobody should be stuck paying for a service they no longer want.” Although most of the new requirements won’t take effect for about six months, the stock price of Planet Fitness fell 8 percent after the announcement.
“Truly nothing is to be expected except for the unexpected.”
~ Alice James
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