Market Update—Week of October 7, 2024

Market Update—Week of October 7, 2024
Presented by Axial Financial Group

A blowout jobs report helped propel the S&P 500 to its fourth consecutive week of gains.

Quick Hits

Report releases: Positive employment data led to a reassessment of a slowing economy.
Financial market data: Equities and yields rose on the back of the excellent jobs report.
Looking ahead: Inflation and Federal Reserve (Fed) meeting minutes will color rate
policy expectations.

Report Releases—September 30–October 4, 2024

Institute for Supply Management (ISM) Manufacturing Index: September (Tuesday)

Manufacturer confidence was unchanged, leaving the index in contractionary territory for the month.

Expected/prior ISM Manufacturing index: 47.5/47.2
Actual ISM Manufacturing index: 47.2

ISM Services Index: September (Thursday)

Service sector confidence improved much more than expected, due in large part to a surge in new orders during the month.

Expected/prior ISM Services index: 51.7/51.5
Actual ISM Services index: 54.9

Employment Report: September (Friday)
Hiring surged, with an impressive 254,000 jobs added during the month. The unemployment rate fell to 4.1 percent, marking a three-month low.

Expected/prior change in nonfarm payrolls: +150,000/+159,000
Actual change in nonfarm payrolls: +254,000

The Takeaway

After a string of softer reports, employment data was much better than expected, helping slow rate cut expectations.
Service sector confidence improved much more than expected, leading to a solid week of economic data, marred only by a slightly lower-than-expected ISM manufacturing report.

Market Data

Equity

Index	Week-to-Date	Month-to-Date	Year-to-Date	12-Month
S&P 500	0.26%	–0.18%	21.86%	36.86%
Nasdaq Composite	0.12%	–0.27%	21.51%	38.13%
DJIA	0.13%	0.09%	14.03%	30.42%
MSCI EAFE	–3.73%	–2.24%	11.01%	26.90%
MSCI Emerging Markets	0.42%	0.73%	17.99%	30.75%
Russell 2000	–0.48%	–0.76%	10.32%	29.84%

Source: Bloomberg, as of October 4, 2024

The S&P 500 and Nasdaq Composite registered a fourth consecutive week of gains after Friday’s impressive jobs report. That data helped bring back the soft-landing narrative after a few months of weaker economic data led to the Fed’s 50 basis point (bps) rate cut. Oil prices rose, along with geopolitical tensions between Israel and Iran. This helped lead to energy outperformance. Underperformers included apparel manufacturers, trucking, regional banks, home builders,
and electric vehicles.

Fixed Income

Index	Month-to-Date	Year-to-Date	12-Month
U.S. Broad Market	–1.01%	3.40%	11.37%
U.S. Treasury	–1.11%	2.68%	9.22%
U.S. Mortgages	–1.00%	3.45%	12.28%
Municipal Bond	–0.02%	2.27%	10.76%

Source: Bloomberg, as of October 4, 2024

Yields rose across the curve after the jobs report, which lowered Fed rate cut expectations and caused investors to reassess economic growth expectations. After the employment report was released, the probability of a 50 bps rate cut in November dropped from roughly 50 percent to nearly 0 percent. The rise in shorter-term rates led to the Treasury yield curve inverting again because shorter-term rates rose more than long-term rates.

The Takeaway

A blowout jobs report helped support equities, leading to a fourth consecutive week of gains.
Yields rose as the narrative of a softening economy seemed to dissipate—along with the probability of another 50 bps rate cut next month.

Looking Ahead

This week, data will focus on the Fed’s meeting minutes, inflation, and consumer sentiment.

The week kicks off with the trade balance, which is expected to fall modestly in August after increasing notably in July.
Meeting minutes from the September Federal Open Market Committee (FOMC), expected on Wednesday, should provide insight into the decision-making that led to the 50 bps rate cut.
On Thursday, the Consumer Price Index report for September will be released. It’s expected to show that headline inflation dropped to 2.3 percent and core inflation remained unchanged at 3.2 percent.
We expect two reports on Friday: the Producer Price Index, which is set to show a 0.1 percent monthly increase; and the University of Michigan consumer sentiment survey, which is expected to show a modest decline.

Disclosures: Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor’s. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Russell 2000^® Index measures the performance of the 2,000 smallest companies in the Russell 3000^® Index. The Bloomberg US Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The U.S. Treasury Index is based on the auctions of U.S. Treasury bills, or on the U.S. Treasury’s daily yield curve. The Bloomberg US Mortgage Backed Securities (MBS) Index is an unmanaged market value-weighted index of 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC), and balloon mortgages with fixed-rate coupons. The Bloomberg US Municipal Index includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than 2 years) selected from issues larger than $50 million. Basis points (bps) is a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 1/100th of 1 percent, or 0.01 percent.

Market Update—Week of October 7, 2024