Good news is good news for investors.
Good news is good news for investors.
The S&P 500 Index and NASDAQ Composite each edged out their fourth straight week of gains, avoiding breaking the streak after Friday's unexpectedly strong September jobs report. A port strike on the East and Gulf Coasts that had the potential to slow economic growth in the fourth quarter quickly ended with a temporary union agreement, while violence in the
Last Week in Review:
- The S&P 500 Index rose +0.3%. Over its four-week streak of gains, the Index is higher by +6.3%.
- The NASDAQ Composite gained +0.1%. The tech-heavy benchmark is higher by +8.7% over the last four weeks.
- Stock gains on the week were stronger across the Dow Jones Industrials Average (+0.8%) and the Russell 2000 Index (+1.5%). The Dow is up nearly +5.0% over its current four-week winning streak.
- Along with Big Tech, airlines, autos, banks, retail apparel, energy, and insurance performed well during the week.
- Government bond yields rose significantly, following stronger-than-expected labor data and falling odds of another outsized 50-basis point Fed rate cut next month. However, the 2-year/10-year
Treasury spread remained positive, but barely. - The
U.S. Dollar Index strengthened against a basket of currencies. - Gold ended slightly lower. In 2024, the precious metal is higher by over +28.0%, outperforming the S&P 500. In our view, rising
U.S. debt levels, falling interest rates, a slowingU.S. economy, and an increasingly unstable geopolitical environment are key factors that could remain supportive for the noble metal over the next six to twelve months. - West Texas Intermediate (WTI) crude settled higher, logging its best week since
March 2023 . Crude prices have jumped higher recently on growing anxiety that the currentMiddle East conflict acrossIsrael ,Gaza ,Lebanon , andIran continues to escalate to levels that may start to risk global crude supply. Roughly 20% of the world's oil supply runs through theStrait of Hormuz . - Here at home, the
International Longshoremen's Association agreed to suspend their strike untilJanuary 15 th, which will allow cargo to move again off the East andGulf Coast ports. A tentative agreement boosts dock worker pay by about +62% over six years and gives time for negotiations to develop on other key issues, such as automation. Bottom line: A port strike that could have slowed growth and disrupted the economy and markets for a period in the fourth quarter has been avoided. Notably, it's one less conceinvestors need to contend with through yearend. - September nonfarm payrolls grew by an unexpectedly strong +254,000, while the unemployment rate edged lower to 4.1% last month from 4.2% in August. Further, July and August job figures were revised higher by a combined +72,000. Add in a very healthy level of available jobs in the
U.S. (over +8 million in August) and a strong September private payrolls report, and you have aU.S. economy that continues to benefit from a labor market on firm footing. - Finally, ISM manufacturing showed activity coming in slightly below consensus for September, while ISM services activity beat estimates and saw its highest level since
February 2023 .
Reasons to maintain a positive but balanced outlook as the year winds down.
As it stands at the moment, we believe the bulls appear to have the edge in directing stock traffic at the start of the fourth quarter. Economic data remains solid, particularly on employment, and the Fed easing cycle is in its early stages. Notably, last week's falling odds for an outsized 50-basis point cut in November and increasing odds for a more gradual 25-basis point cut next month should be music to investor's ears. A Fed that can gradually bring down its policy rate in an environment where growth remains positive and inflation continues to ebb lower is likely far more supportive for asset prices than an environment in which the Fed has to lower rates quickly and by outsized cuts (i.e., 50-basis point increments).
Simply, good news is good news at the moment. Economic growth should remain firm (we see the
That said, valuations across major
In addition,
In addition, potential volatility after the
In sum, we believe investors should maintain a somewhat optimistic view of the
The Week Ahead:
The third quarter earnings season will kick off this week with PepsiCo,
- Q3'24 S&P 500 earnings per share (EPS) is expected to grow by +4.2% year-over-year on revenue growth of +4.7%. S&P 500 EPS expectations have moved down for the current quarter, leaving a lower hurdle rate for companies in aggregate to surpass over the coming weeks. Information Technology is again expected to provide a large tailwind to S&P 500 profits in the third quarter, while Energy is expected to be the largest drag. Health Care and Communication Services should also be additive to S&P 500 profit growth. Investors will likely focus on artificial intelligence trends, with "retuon investment" playing a growing theme in how Big Tech results are interpreted in the market. Impacts/outlooks from Fed easing, updates on bifurcated consumer trends, the health of business spending, operational cost management/efficiency, labor trends, and profit margins will also help shape how the market reacts to Q3 earnings.
- Consumer and producer inflation is expected to have cooled slightly in September on most major measures, while a preliminary look at October Michigan consumer sentiment is expected to show a slight uptick. The September FOMC meeting minutes, weekly jobless claims, and a fresh look at small business sentiment will also provide key updates on the direction of policy and economic sentiment.
Important Disclosures
Sources: FactSet and Bloomberg. FactSet and Bloomberg are independent investment research companies that compile and provide financial data and analytics to firms and investment professionals such as
The views expressed are as of the date given, may change as market or other conditions change, and may differ from views expressed by other
Some of the opinions, conclusions and forward-looking statements are based on an analysis of information compiled from third-party sources. This information has been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by
Commodity investments may be affected by the overall market and industry- and commodity-specific factors, and may be more volatile and less liquid than other investments.
There are risks associated with fixed-income investments, including credit risk, interest rate risk, and prepayment and extension risk. In general, bond prices rise when interest rates fall and vice versa. This effect is usually more pronounced for longer term securities.
Investments may not keep pace with inflation, resulting in loss of purchasing power.
In general, bond prices rise when interest rates fall and vice versa. This effect is usually more pronounced for longer term securities. Yields may vary.
Stock investments involve risk, including loss of principal. High-quality stocks may be appropriate for some investment strategies. Ensure that your investment objectives, time horizon and risk tolerance are aligned with investing in stocks, as they can lose value.
The products of technology companies may be subject to severe competition and rapid obsolescence, and their stocks may be subject to greater price fluctuations.
Past performance is not a guarantee of future results.
An index is a statistical composite that is not managed. It is not possible to invest directly in an index.
Definitions of individual indices and sectors mentioned in this article are available on our website at ameriprise.com/legal/disclosures in the Additional Ameriprise research disclosures section.
The
The NASDAQ Composite index measures all NASDAQ domestic and international based common type stocks listed on the
The Dow Jones Industrial Average (DJIA) is an index containing stocks of 30 Large-Cap corporations in
The Russell 2000 Index measures the performance of the small-cap segment of the US equity universe. The Russell 2000 is constructed to provide a comprehensive and unbiased small-cap barometer and is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set. The Russell 2000 includes the smallest 2000 securities in the Russell 3000.
West Texas Intermediate (WTI) is a grade of crude oil commonly used as a benchmark for oil prices. WTI is a light grade with low density and sulfur content.
The
The ISM Services is compiled and issued by the
University of
The US Dollar Index (USDX) indicates the general international value of the USD. The USDX does this by averaging the exchange rates between the USD and major world currencies. This is computed by using rates supplied by approximately 500 banks.
Price/Earnings: An equity valuation multiple calculated by dividing the market share price, as of a certain date, by earnings per share. Trailing P/E uses the share price divided by the past four-quarters' earnings per share. Forward P/E uses the share price as of a certain date divided by the consensus estimate of the future four-quarters' EPS.
Third party companies mentioned are not affiliated with
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