Week in Review: October 25, 2024

October 28, 2024

Recap & Commentary

Markets ended the week lower as investors digested generally better than expected economic data, a further rise in interest rates, and the release of quarterly earnings reports by ~150 S&P 500 companies.

In the five weeks since the Fed cut interest rates at its September meeting, longer-term interest rates have moved higher, highlighted by the 10-Year Treasury yield which has increased 0.50%, defying general expectations for rates to decline following the conclusion of the Fed’s rate hike cycle. The increase has been driven in part by continued good economic data which has  forced investors to recalibrate their assumptions prior to the Fed’s September meeting about the potential pace of rate cuts. The higher rates also appear to be reflecting renewed concerns about future fiscal policy as both presidential candidates have proposed policies that would continue deficit spending thereby adding to the national debt. The 10-Year Treasury yield ended the week at 4.24%, its highest level since July.

Geopolitical tensions intensified as Israel responded to Iran’s ballistic missile attack from the start of the month by targeting a number of military sites. Israel appeared to avoid attacking Iran’s energy infrastructure or nuclear facilities which analysts worried might invite an aggressive Iranian response.

Through Friday, 37% 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

According to industry group S&P Global, the US services sector continued to expand at a moderate pace in October, while manufacturing continued to contract, albeit at a slower pace than in September. Aggregate employment contracted though it was “very modest” and less than the prior two months.

Housing data provided a mixed picture on the sector. Existing home sales fell to their slowest pace since 2010, dropping to an annualized pace of 3.82M in September. The median price increased 3.0% from a year ago to $404.5K. New home sales fared better, rising 4.1% from August and 6.3% from a year ago, to their fastest pace since May 2023. The median price was effectively unchanged from a year ago at $423.6K.

Durable good orders contracted 0.8% in September vs. the prior decline of 1.1% in August. A more nuanced measure of business spending, excluding volatile defense and aircraft orders, declined 1.1%, reflecting current tepid demand.

Consumer sentiment rose slightly in September aided by improvements in consumers’ views of both current and future economic conditions.  Importantly, one-year inflation expectations dropped 0.2% to 2.7%, news that will certainly be welcomed by Fed officials.  Five-year expectations were unchanged at 3.0%.

Weekly jobless claims declined 15K to 227K as the impacts of recent hurricanes Milton and Helene receded and the claims data normalized to pre-storm levels.

Of Note

Semiconductor company Nvidia which has benefitted from strong demand for its specialized artificial intelligence (AI) chips briefly surpassed Apple as the world’s largest publicly traded company with a market cap (value) of $3.53T.

Market Indices   (As of 10/25/2024)

• Oct. Employment Report
• 3Q GDP
• Core PCE Inflation
• ISM Manufacturing
• JOLTs Report
• Pending Home Sales
• Consumer Confidence
• Weekly Jobless Claims