Weekly Wrap

It was a somewhat choppy week for stocks. The major indices exhibited up and down action, ultimately rallying on Friday. The S&P 500 and Dow Jones Industrial Average set record highs. The market placed geopolitical worries, along with concerns about Hurricanes Milton and Helene, on the back-burner and focused on economic releases and Fed policy instead.

The September Consumer Price Index report was hotter-than-expected at the headline (actual 0.2%; expected 0.1%) and core (actual 0.3%; expected 0.2%) level. The year-over-year growth rate of core-CPI increased to 3.3% from 3.2% in August and the growth rate of headline CPI slowed to 2.4% from 2.5% in August.

Some positive news from the report was that the shelter component, which has been the biggest driver of core inflation, saw its smallest increase (+0.2%) since June. Investors also received weekly jobless claims, which totaled 258,000 versus last week's count of 225,000.

Other data included the September Producer Price Index and preliminary consumer sentiment data from October, which also supported the idea that the Fed will continue cutting rates.

The market didn't react much to the minutes for the September 17–18 FOMC meeting, which didn't contain any surprises. The minutes showed that almost all participants saw upside risks to the inflation outlook as having diminished, while downside risks to employment were seen as having increased.

By the end of the week, market participants were digesting some earnings results from influential names in the financial space. JPMorgan Chase (JPM), Wells Fargo (WFC), and BlackRock (BLK) all received positive responses to their earnings results. 

Monday:

Monday's trade featured a negative bias through the entire session. The major indices were trading slightly lower for most of the day before selling picked up in the afternoon. The S&P 500 ultimately settled 1.0% lower, the Nasdaq Composite closed 1.2% below its prior close, the Dow Jones Industrial Average declined 0.9%, and the Russell 2000 settled with a 0.8% loss.

The late deterioration coincided with some mega caps and chipmakers sliding below prior closing levels.

Some selling interest was related to profit-taking activity after the solid run of late. The major indices were near record highs and ended last week on an upbeat note following a very strong jobs report for September.

Downside action was also related to ongoing geopolitical worries around a potential escalation between Israel and Iran. This fear manifested in another jump in oil prices.

Reviewing Monday's economic data:

• Consumer credit increased by $8.9 billion in August (Briefing.com consensus $12.7 billion) after increasing a revised $26.7 billion (from $25.5 billion) in July.
  • The key takeaway from the report is that revolving credit decreased, suggesting the presence of increased caution among consumers.

Tuesday:

The stock market closed on a higher note on buy-the-dip interest after a soft start to the week. 

Mega caps, growth stocks, and chipmakers had an outsized impact on index gains in Tuesday's broad rally. NVIDIA (NVDA) was a top performer after a Bloomberg report that Hon Hai Precision is aiming to increase capacity to meet demand for artificial intelligence products.

Calmer action in Treasuries after sharp losses of late, along with a drop in oil prices also helped boost the equity market.

Reviewing Tuesday's economic data:

• September NFIB Small Business Optimism 91.5; Prior 91.2
• August Trade Balance -$70.4 bln (Briefing.com consensus -$71.3 bln); Prior was revised to -$78.9 bln from -$78.8 bln
  • The key takeaway from the report is that the net exports component for August will be a positive input for Q3 GDP forecasts.

Wednesday:

The stock market was in rally-mode, leading the S&P 500 (+0.7%) and Dow Jones Industrial Average (+1.0%) to new record highs. The market benefitted from ongoing momentum following yesterday's bounce, along with strength in some mega caps and semiconductor-related names.

Alphabet (GOOG) was left out of the rally following news that the Department of Justice is considering a breakup of Google.

The market didn't react much to the minutes for the September 17–18 FOMC meeting, which didn't contain any surprises. The minutes showed that almost all participants saw upside risks to the inflation outlook as having diminished, while downside risks to employment were seen as having increased.

However, Dallas Fed President Logan (non-FOMC voter) noted today that she sees a meaningful risk that inflation could get stuck above the Fed's 2% goal and that she believes the FOMC should not rush to get the funds funds target to a "normal" or "neutral" level.

Reviewing Wednesday's economic data:

• Weekly MBA Mortgage Applications Index -5.1%; Prior -1.3%
• August Wholesale Inventories 0.1% (Briefing.com consensus 0.2%); Prior 0.2%
• Weekly EIA crude oil inventories had a build of 5.81 million barrels after last week's build of 3.89 million barrels

Thursday:

There was a negative bias in the equity market through the entire session on below-average volume. Downside moves were relatively limited, though.

Participants were reacting to some mixed economic data. The September Consumer Price Index report was hotter-than-expected at the headline (actual 0.2%; expected 0.1%) and core (actual 0.3%; expected 0.2%) level. The year-over-year growth rate of core-CPI increased to 3.3% from 3.2% in August and the growth rate of headline CPI slowed to 2.4% from 2.5% in August.

Some positive news from the report was that the shelter component, which has been the biggest driver of core inflation, saw its smallest increase (+0.2%) since June.

Investors also received weekly jobless claims, which totaled 258,000 versus last week's count of 225,000.

The market is still feeling optimistic about the Fed cutting rates by 25 basis points at the November FOMC meeting after the data and after comments from a voting member of the committee.

Reviewing Thursday's economic data:

• Weekly Initial Claims 258K (Briefing.com consensus 229K); Prior 225K, Weekly Continuing Claims 1.861 mln; Prior was revised to 1.819 mln from 1.826 mln
  • The key takeaway from the report is the jump seen in initial jobless claims, which was presumably influenced in part by Hurricane Helene but not entirely. On an unadjusted basis, initial jobless claims totaled 234,780, an increase of 53,570 from the previous week. Seasonal factors, according to the Department of Labor, had expected an increase of 23,665 from the previous week.
• September CPI 0.2% (Briefing.com consensus 0.1%); Prior 0.2%, September Core CPI 0.3% (Briefing.com consensus 0.2%); Prior 0.3%
  • The key takeaway from the report is that the core rate increased year-over-year even though the shelter component, which has been the biggest driver of core inflation, saw its smallest increase (+0.2%) since June.

Friday:

The stock market closed a choppy week with a strong rally. The Dow Jones Industrial Average (+1.0%) and S&P 500 (+0.6%) closed at all-time highs, which had the S&P 500 above 5,800 for the first time and left the DJIA more than 400 points higher. The Nasdaq Composite logged a 0.3% gain and the Russell 2000 outperformed its peers, jumping 2.1%. 

Tesla (TSLA) was left out of the everything rally following a disappointing reveal of its robotaxi. Other corporate news items acted as support for the broader market, including earnings results from JPMorgan Chase (JPM), Wells Fargo (WFC), and BlackRock (BLK).

The rally followed Thursday morning's economic data, which included the September Producer Price Index and preliminary consumer sentiment data from October, which led the market to believe that the Fed won't stop cutting rates.

Reviewing Friday's economic data:

• September PPI 0.0% (Briefing.com consensus 0.1%); Prior 0.2%, September Core PPI 0.2% (Briefing.com consensus 0.2%); Prior 0.3%
  • The key takeaway from the report is that producers are still tangling with elevated prices, excluding food and energy, which means the Fed is still going to have to tangle with inflation data that will make it harder at this stage to justify aggressive rate cuts.
• October Univ. of Michigan Consumer Sentiment - Prelim 68.9 (Briefing.com consensus 70.1); Prior 79.1
  • The key takeaway from the report is that consumer sentiment picked up in September, and has been picking up as inflation pressures have moderated.