September 8, 2024
Volume 11, Issue 36
Weekly Recap
The S&P 500 suffered its worst weekly drop in 18 months last week, as worries over an economic slowdown appeared to weigh on sentiment. Information technology shares led the declines, driven in part by a drop in NVIDIA following rumors that it may be the subject of a Justice Department antitrust investigation and on the back of an earnings report that wasn’t quite as great as expected, which led to a roughly $300 billion drop in the chip giant’s market capitalization. Energy shares were also especially weak due to a decline in oil prices. Conversely, the typically defensive utilities, consumer staples, and real estate sectors held up better. Some speculated that a factor in the declines may have been nervousness over seasonal trading patterns. Historically, September has been one of the worst months for stocks, averaging a 0.7 percent loss since 1950, while the S&P 500 has declined 4.9, 9.3, 4.8, and 3.9 percent over the last four years. Presidential election years generally see enhanced volatility, too.
Last week’s heavy economic calendar generally surprised to the downside, raising fears that the Federal Reserve had waited too long to ease monetary policy. On Tuesday, the Institute for Supply Management reported that its gauge of U.S. manufacturing activity remained firmly in contraction territory in August, with new orders falling for the third consecutive month.
Wednesday’s tally of July job openings from the Labor Department arguably came as an even bigger disappointment, with the number of unfilled positions falling to its lowest level (7.67 million) since January 2021. The number of people leaving their jobs voluntarily – often considered a better gauge of the strength of the labor market – ticked higher but off a downwardly revised number in June, which was the lowest since September 2020. On Thursday, payroll processing firm ADP reported its count of private payrolls had increased only 99,000 in August, well below forecasts and the lowest since January 2021.
Friday’s official payrolls report from the Labor Department painted a more complicated picture of the health of the jobs market. Overall, employers added 142,000 jobs in August, below consensus estimates of around 160,000, while July’s gain was revised down to 89,000, marking the lowest level since December 2020. The household survey revealed that the unemployment rate had ticked lower, however, from 4.3 to 4.2 percent. Average hourly earnings also rose 0.4 percent, better than expected.
While traders continued to expect a rate cut at the Fed’s upcoming policy meeting in September, Friday’s jobs data appeared to sharply reduce expectations that the Fed would cut rates by a full 50 basis points (0.50 percentage points), as indicated by the CME FedWatch Tool. Yields on U.S. Treasury paper fell significantly across the yield curve last week, but the front end rallied harder and the 2T/10T part of the curve disinverted. The 10-year note hit its lowest yield level since May 2023.
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. job growth rebounded in August from levels that were softer than initially reported this summer, leaving the Federal Reserve on track to begin a series of rate cuts when officials meet later this month. The economy added 142,000 jobs, according to the Labor Department, an uptick from July data that sparked slowdown fears and jarred global financial markets. The unemployment rate in August ticked lower to 4.2 percent. In response, U.S. Treasury yields fell.
The yield curve has disinverted.
Job openings slumped to their lowest level in 3½ years in July, the Labor Department reported Wednesday in another sign of slack in the labor market.
Private sector payrolls grew at the weakest pace in more than 3½ years in August, providing yet another sign of a deteriorating labor market, according to ADP.
In the week ending August 31, the advance figure for seasonally adjusted initial jobless claims was 227,000, a decrease of 5,000 from the previous week’s revised level. The previous week’s level was revised up by 1,000 from 231,000 to 232,000. The 4-week moving average was 230,000, a decrease of 1,750 from the previous week’s revised average. The previous week’s average was revised up by 250 from 231,500 to 231,750.
The ISM Services index was at 51.5 percent, up from 51.4 percent last month. The employment index decreased to 50.2 percent, from 51.1 percent. Note: Above 50 indicates expansion, below 50 in contraction.
While falling interest rates are usually viewed as a boon for the stock market, that’s not the case for all parts of the investment universe. In fact, for money you may need soon, where safety is a major priority, falling interest rates aren’t great news at all.
Americans have rarely been this giddy about the stock market.
An argument for small caps.
Why markets are skittish.
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.
- Running the Numbers (Callie Cox)
- Advisors Are Afraid to Retire, and That’s a Problem (Jane Wollman Rusoff)
- The butterfly effect, index funds, and the rise of mega caps (Joachim Klement)
This is the best thing I have read recently. The smartest. The stupidest. The silliest. The funniest. The funnest(inspired by this). The truest. “The best advice. The most inspiring. The biggest scandal. The biggest mystery. Found in an attic. Cool. On the need to diversify.
Workers at companies with 401(k) plans that automatically enroll their employees participated at a rate of 94 percent in 2023, compared to 67 percent at firms where sign-up is voluntary.
“Wars are not won by fighting battles; wars are won by choosing battles.”
~ George Patton
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
