Week in Review: October 18, 2024

October 21, 2024

Recap & Commentary

Markets ended the week modestly higher, with the S&P 500 notching its 6th consecutive weekly gain, the longest such streak of the year. Both the S&P 500 and Dow Jones Industrial Average ended the week at new record highs. Given the relatively light economic calendar, investors were left to focus on comments by various Fed officials, along with third quarter earnings reports.

On Monday, Federal Reserve Governor Chris Waller stated that “monetary policy should proceed with more caution on the pace of rate cuts than was needed at the September meeting.” Waller specifically noted the strength of the September employment report which he described as “unexpectedly strong” and the September inflation report which he described as “disappointing”. Overall, Waller believes the U.S. economy is on a “solid footing” with “little indication of a major slowdown in economic activity.”

On Friday, Atlanta Fed President Raphael Bostic said, “We must get inflation back to our 2% target; I don’t want us to get to a place where inflation stalls out because we haven’t been restrictive for long enough, so I’m going to be patient.“

The comments by Waller and Bostic, combined with recent comments by Fed Chair Jay Powell, reinforced the notion that the Fed is unlikely to cut rates by another 0.50% at its November meeting.

Through Friday, 6% of S&P 500 companies had reported 3Q24 earnings. Thus far, 79% have beaten their earnings estimate, while 60% have beaten their revenue estimate. According to industry group FactSet, consolidated earnings growth for the quarter is expected to be 4.1%.

Economic Commentary

September retail sales surprised to the upside, increasing 0.4%, better than the 0.3% consensus forecast and up from August’s 0.1% pace. Core retail sales, excluding spending on auto as gas, rose 0.7%, better than August’s 0.3% pace.  The overall strength of spending provided further evidence that the consumer remains willing and able to spend despite depressed consumer sentiment. Given the economic importance of the consumer, the report also suggested that GDP growth remained healthy as 3Q24 drew to a close. On the news, the Atlanta Fed’s GDPNow forecasting tool, which provides a running estimate of GDP growth based on available data , increased from 3.2% to 3.4%.

Housing starts slipped 0.5% in September following a jump of nearly 8% in August. Within the broader headline number, single-family housing starts increased for the second consecutive month, matching a recent improvement in builder sentiment. Building permits, often viewed as a leading indicator of future building activity, fell 3% from August.

Weekly jobless claims fell nearly 20K to 241K following a sharp increase the prior week attributed to recent hurricanes Helene and Milton. In addition, the ongoing strike at Boeing by ~33K could also be having ripple effects on initial jobless claims. The strike has added to the company’s myriad problems forcing it to announce plans to cut 17K jobs, or ~10% of its global  workforce.

Of Note

The European Central Bank (ECB) cut its key policy rate by 0.25%, its third such cut this year. The cut came as inflation has continued to slow while at the same time economic activity has shown sign of weakness.

Market Indices   (As of 10/18/2024)

• S&P Composite PMI
• Existing Home Sales
• New Home Sales
• Durable Good Orders
• Consumer Sentiment
• Weekly Jobless Claims