October 6, 2024
Volume 11, Issue 40
Weekly Recap
What started as a relatively quiet trading week quickly picked up steam as U.S. markets opened on Tuesday, following reports that Iran was preparing to launch a retaliatory ballistic missile attack against Israel. Later that day (evening in the Middle East), Iran fired nearly 200 missiles directly at Israel. While most of the missiles were intercepted, there were several hits in the southern and central parts of the country and threats of “more devastating attacks” if Israel responded. Stocks pulled back sharply, with the S&P 500 down 1.38 percent at the close of trading. Markets stabilized on Wednesday, however, mostly because worst-case scenarios failed to materialize. Tuesday brought another complication for the markets in the form of the start of a walkout by the International Longshoremen’s Association, which effectively closed operations at every major port on the East and Gulf Coasts, which together represent the capacity to handle as much as half of all U.S. trade volumes. Fears of a new round of broken supply chains and inflationary pressures dissipated on Thursday evening, however, following news of a temporary agreement that will delay any walkout until at least mid-January.
Nevertheless, the news seemed to be overshadowed as trading resumed Friday morning by the closely watched monthly nonfarm payrolls report. The Labor Department announced that employers had added 254,000 jobs in September, nearly twice the consensus estimates and the most since March. August’s gain was also revised higher. The household survey also brought better-than-expected news, with the unemployment rate unexpectedly ticking lower to 4.1 percent.
Although stocks appeared initially to rise on the news, investors seemed unsure how to react to the data, perhaps because of the inflationary implications of an upward surprise in wage figures and the Fed’s likely response. Most now seem to think a 50-basis point rate cut at the next Fed meeting is now off the table. Average hourly earnings rose 0.4 percent in September on the heels of an upwardly revised 0.5 percent gain in August – the fastest pace since the start of the year.
While generally upbeat, the payrolls report also revealed another monthly decline in manufacturing jobs, the fifth such contraction so far in 2024. On Monday, the Institute for Supply Management reported that its gauge of factory activity had unexpectedly remained steady in September at 47.2, which is still firmly in contraction territory (levels above 50.0 indicate expansion). In stark contrast, the ISM’s gauge of services sector activity, reported Wednesday, jumped much more than expected to 54.9, its highest level in 19 months. Less favorably, the report also showed price pressures in the sector increasing to their highest level since the start of the year. The jobs report led to a sell-off and thus a spike in bond yields, with the yield on the benchmark 10-year U.S. Treasury note jumping to its highest intraday level (3.98 percent) since August 8. The 2T added 38bp week-over-week, the 5T 31bp, the 10T 23bp, and the long-bond 16 bp.
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
The U.S. labor market strengthened in the weeks before Election Day, as job growth accelerated in September and the unemployment rate ticked lower. Employers added 254,000 jobs added 254,000 jobs last month, the Labor Department announced Friday. That was significantly more than the 150,000 economists expected and marked the largest monthly increase since March. The unemployment rate slipped to 4.1 percent. The report is likely to close the door on another half-percentage-point rate cut at the Fed’s meeting next month and to keep officials on track to lower rates by a quarter point.
From Fed Chair Powell: Economic Outlook (watch here). Excerpt below.
“Our economy is strong overall and has made significant progress over the past two years toward achieving our dual-mandate goals of maximum employment and stable prices. Labor market conditions are solid, having cooled from their previously overheated state. Inflation has eased, and my Federal Open Market Committee colleagues and I have greater confidence that it is on a sustainable path to 2 percent. At our meeting earlier this month, we reduced the level of policy restraint by lowering the target range of the federal funds rate by 1/2 percentage point. That decision reflects our growing confidence that, with an appropriate recalibration of our policy stance, strength in the labor market can be maintained in an environment of moderate economic growth and inflation moving sustainably down to our objective.”
As investors focus on the pace of interest rate cuts in the U.S., the country’s ballooning – and politically sensitive – debt load poses risks that markets are not being priced in, according to some estimates.
The ISM Services index was at 54.9 percent, up from 51.5 percent last month. The employment index decreased to 48.1 percent, from 50.1 percent. Note: Above 50 indicates expansion, below 50 in contraction. The ISM manufacturing index indicated expansion. The PMI was at 47.2 percent in September, unchanged from 47.2 percent in August. The employment index was at 43.9 percent, down from 46.0% the previous month, and the new orders index was at 46.1 percent, up from 44.6 percent.
In the week ending September 28, the advance figure for seasonally adjusted initial jobless claims was 225,000, an increase of 6,000 from the previous week’s revised level. The previous week’s level was revised up by 1,000 from 218,000 to 219,000. The 4-week moving average was 224,250, a decrease of 750 from the previous week’s revised average. The previous week’s average was revised up by 250 from 224,750 to 225,000.
Small-cap stocks are expected to be among the great beneficiaries of any interest-rate cut. That isn’t happeningthis time, at least so far.
The Harvard Endowment is enormous, with over $50 billion in assets. Its investment returns have been poor, especially lately.
“Buffer” funds have become one of Wall Street’s hottest products. Make sure you understand the trade-off. Younger Americans are beginning to invest sooner than previous generations.
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.
- Planning For Early Retirement (Ben Carlson)
- Your Next Financial Adviser Will Be on an App (Allison Schrager)
- A Checklist for Open Enrollment Season (Christine Benz)
This is the best thing I’ve read recently. The most important. The most insightful. The most terrifying. The best advice. RIP, Maggie Smith. Freaks and Geeks. Sad and concerning. SNL is 50. Rat birth control. Republic of Distrust. How to build a Lego set. I regret to inform you that Fat Bear Week has been delayed because one of the contestants mauled another one to death in a river on a widely viewed live-stream feed.
Seniors are frequent victims of financial fraud, and for every reported case of elder abuse, 24 others go unreported, according to a study cited by the National Center on Elder Abuse. The study pegs the annual losses from elder financial abuse at $28.3 billion.
“Optimism with a healthy dose of skepticism will generate far better results than living in fear or flip flopping from fear to hope.”
~ Cullen Roche
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
Chart Source – https://www.cnr.com/insights/speedometers.html
