Weekly Wrap

This was a huge week in terms of earnings and economic news and the major indices closed mostly lower. The S&P 500 declined 1.4%, the Nasdaq Composite declined 1.5%, and the Dow Jones Industrial Average settled 0.2% lower. The Russell 2000 eked out a 0.1% gain on the week. 

Mega cap names that reported earnings garnered mixed responses from investors. Alphabet (GOOG) and Amazon.com (AMZN) closed 3.4% and 5.4% higher, respectively, on the week after their quarterly reports. Apple (AAPL), Meta Platforms (META), and Microsoft (MSFT) closed with losses ranging from 1.1% to 4.2% following their earnings reports.

The Vanguard Mega Cap Growth ETF (MGK) settled 1.8% lower this week. 

Chipmakers showed weakness through the week. Advanced Micro Devices (AMD) was an influential loser, dropping 9.2% after reporting earnings and soft Q4 revenue guidance. The PHLX Semiconductor Index (SOX) settled 4.1% lower than last Friday. 

In terms of economic news, market participants were digesting:

• Initial jobless claims that were a low 216,000, the Q3 Employment Cost Index that was up 0.8%, personal income that was up 0.3% month-over-month in September, personal spending that increased 0.5%, and the core-PCE Price Index was stuck at 2.7% year-over-year for the third straight month.
• Private-sector payrolls, which increased by 233,000 in October (Briefing.com consensus), according to ADP, real GDP, which increased at an annual rate of 2.8% in the third quarter (Briefing.com consensus 3.0%), bolstered by a 3.7% increase in consumer spending, and pending home sales that jumped 7.4% in September (Briefing.com consensus 2.5%).
• Nonfarm payrolls that increased by just 12,000 (Briefing.com consensus 120,000) while nonfarm private payrolls decreased by 28,000 (Briefing.com consensus 105,000). This news was followed by a report of tepid construction activity in September and a dip in the October ISM Manufacturing PMI to 46.5% (Briefing.com consensus 47.6%) -- the lowest reading in 2024 -- from 47.2% in the previous month.
  • The jobs data were depressed by the Boeing strike and likely by the effects of Hurricanes Helene and Milton, yet with forecasts suggesting those influences could lop off something on the order of 100,000 positions, the view to October, coupled with sizable downward revisions to the August and September payroll figures, connote softness in hiring activity.

Treasury yields settled sharply higher this week. The 10-yr yield jumped 13 basis points to 4.36% and the 2-yr yield settled ten basis points higher at 4.20%.

• Nasdaq Composite: -1.5% for the week / +21.5% YTD
• S&P 500: -1.4% for the week / +20.1% YTD
• Dow Jones Industrial Average: -0.2% for the week / +11.6% YTD
• S&P Midcap 400: -0.2% for the week / +11.6% YTD
• Russell 2000: +0.1% for the week / +9.0% YTD

Monday:

The equity market closed with gains in major indices. 

Gains in some influential names that also report earnings this week were a support factor for the major indices today.

Stocks maintained an upside bias through the entire session despite rising Treasury yields.

There was no US economic data of note today.

Tuesday:

The Nasdaq Composite reached a record close, settling 0.8% higher than Monday.  Mega caps and chipmakers contributed to the upside moves.

Alphabet (GOOG) was an influential winner ahead of its earnings report after Tuesday's close.

The price action in Treasuries kept buying in check in the equity market. Yields moved higher following a strong Consumer Confidence report for October, but ultimately settled little changed from yesterday after a strong $44 billion 7-yr note sale that made for a welcome respite from recent all-around weakness in auction demand and intraday trade.

Reviewing Tuesday's economic data:

• August FHFA Housing Price Index 0.3%; Prior was revised to 0.2% from 0.1%
• August S&P Case-Shiller Home Price Index 5.2% (Briefing.com consensus 5.1%); Prior 5.9%
• October Consumer Confidence 108.7 (Briefing.com consensus 99.0); Prior was revised to 99.2 from 98.7
  • The key takeaway from the report is that the increase in confidence in October was broad-based across all age groups and most income groups, and featured a substantially more optimistic view about future business conditions than the prior month. That sets up to be a supportive component for consumer spending.
• September JOLTS - Job Openings 7.443 mln; Prior was revised to 7.861 mln from 8.040 mln
• September Adv. Intl. Trade in Goods -$108.2 bln; Prior was revised to -$94.2 bln from -$94.3 bln
• September Adv. Retail Inventories 0.8%; Prior was revised to 0.7% from 0.5%
• September Adv. Wholesale Inventories -0.1%; Prior 0.2%

Wednesday: 

The stock market had a mixed showing. The market initially moved higher in response to some economic releases and to solid quarterly results from Alphabet (GOOG). 

Wednesday morning's data featured ADP's private-sector payroll estimate, which increased by a larger-than-expected 233,000 in October and the September numbers were revised higher. Also, the advance Q3 GDP report reflected solid growth in the economy, boosted by consumer spending.

Early buying enthusiasm faded, though, with no specific catalyst to account for the deterioration. Many stocks pulled back from session highs, but downside moves were relatively limited.

Reviewing Wednesday's economic data:

• Weekly MBA Mortgage Applications Index -0.1%; Prior -6.7%
• October ADP Employment Change 233K (Briefing.com consensus 105K); Prior was revised to 159K from 143K
  • The key takeaway from the report is that the payroll gains were broad based by sector, region, and establishment size, underscoring the point that economic activity remains solid and not at all consistent with an economy on the cusp of a recession.
• Q3 GDP-Adv. 2.8% (Briefing.com consensus 3.0%); Prior 3.0%, Q3 Chain Deflator-Adv. 1.8% (Briefing.com consensus 2.3%); Prior 2.5%
  • The key takeaway from the report is that GDP growth was powered by healthy levels of consumer spending. Personal consumption expenditures increased 3.7%. That was the strongest growth rate since the first quarter of 2023 and well in excess of the prior 10-quarter average of 2.3%. The PCE component contributed 2.46 percentage points to real GDP growth in the third quarter.
• September Pending Home Sales 7.4% (Briefing.com consensus 2.5%); Prior 0.6%

Thursday: 

The major indices logged losses across the board. Losses in Microsoft (MSFT) and Meta Platforms (META) weighed down the equity market after their earnings reports. Other mega caps were also influential in index performance and led the Vanguard Mega Cap Growth ETF (MGK) to close 3.0% lower.

Weakness in chipmakers was another limiting factor for equities. Ongoing volatility in the Treasury market was another sticking point for equities.

Reviewing Thursday's economic data:

• Initial jobless claims for the week ending October 26 decreased by 12,000 to 216,000 (Briefing.com consensus 229,000). On an unadjusted basis, they totaled 200,132, a decrease of 3,349 from the prior week when seasonal factors expected an increase of 7,292. Continuing jobless claims for the week ending October 19 decreased by 26,000 to 1.862 million; however, the four-week moving average of 1,869,250 is the highest since November 27, 2021.
  • The key takeaway from the report is that layoff activity remains fairly subdued, yet it has been more challenging for laid-off workers to find new employment.
• The Q3 Employment Cost Index increased 0.8% (Briefing.com consensus 1.0%), seasonally adjusted, for the 3-month period ending in September 2024. Wages and salaries increased 0.8% and benefit costs increased 0.8% from June 2024.
  • The key takeaway from the report is that compensation costs for civilian, private, and state and local government workers decelerated versus the 12-month period ending in September 2023, reflecting a moderation in wage inflation.
• Personal income increased 0.3% month-over-month in September (Briefing.com consensus 0.4%) following a 0.2% increase in August. Personal spending increased 0.5% (Briefing.com consensus 0.4%) following an upwardly revised 0.4% increase (from 0.3%) in August. The PCE Price Index was up 0.2%, as expected, and up 2.1% year-over-year versus 2.3% in August. The core PCE Price Index, which excludes food and energy, was up 0.3% (Briefing.com consensus 0.2%) and up 2.7% year-over-year for the third straight month.
  • The key takeaway from the report is the stickiness in core PCE inflation, which is running comfortably above the Fed's 2% target. That will wash out any expectation for another aggressive rate cut by the Fed anytime soon and it will keep the debate alive as to whether the Fed should keep cutting rates.
• October Chicago PMI dropped to 41.6 (Briefing.com consensus 47.5) from 46.6
• Weekly EIA Natural Gas Inventories showed a build of 78 bcf after last week's build of 80 bcf

Friday:

The stock market closed with gains after Thursday's slide. The major indices closed off session highs, though, as buyer enthusiasm dissipated and some mega caps turned lower. 

The upside bias stemmed from buy-the-dip interest and was in reaction to this morning's economic data, which supported the belief that the Fed will stay on a steady rate-cut path. 

Treasuries had a volatile response to the data, keeping buying efforts in check in the equity market.

Reviewing Friday's economic data:

• October Nonfarm Payrolls 12K (Briefing.com consensus 120K); Prior was revised to 223K from 254K, October Nonfarm Private Payrolls -28K (Briefing.com consensus 105K); Prior was revised to 192K from 223K,
• October Avg. Hourly Earnings 0.4% (Briefing.com consensus 0.3%); Prior was revised to 0.3% from 0.4%, October Unemployment Rate 4.1% (Briefing.com consensus 4.1%); Prior 4.1%, October Average Workweek 34.3 (Briefing.com consensus 34.2); Prior was revised to 34.3 from 34.2
  • The key takeaway from the report is that it has reinvigorated the market's view that the Fed will stay on a steady rate-cut path that will include cutting the target range for the fed funds rate by 25 basis points at next week's FOMC meeting and again at the December FOMC meeting.
• October S&P Global US Manufacturing PMI - Final 48.5; Prior 47.8
• October Construction Spending 0.1% (Briefing.com consensus 0.0%); Prior was revised to 0.1% from -0.1%
  • The key takeaway from the report is that private construction activity was subdued in September.
• October ISM Manufacturing Index 46.5% (Briefing.com consensus 47.6%); Prior 47.2%
  • The key takeaway from the report is that it has reinforced the understanding that conditions in the U.S. manufacturing sector remain weak.