What We Are Watching This Week
- Empire State Manufacturing Survey
- US Retail Sales
- Industrial Production
- Housing Starts
Highlights From Last Week
- Consumer Credit
- Consumer Price Index
- Producer Price Index
The S&P 500 Index, Dow Jones Industrial Average, and S&P MidCap 400 Index reached record highs over the week, boosted by better-than-expected earnings results at the start of the season. JPMorgan Chase and Wells Fargo saw their shares rise on Friday after reporting smaller-than-expected declines in third-quarter profits, with JPMorgan even posting a modest revenue increase. NVIDIA shares climbed significantly, helping growth stocks outperform value stocks and offset a drop in Alphabet (Google’s parent company) after reports surfaced that the Justice Department might seek a court-ordered breakup of the company.
Canada’s main stock index reached a record high on Friday, driven by gains in tech stocks ahead of a long weekend, while an unexpected drop in the domestic unemployment rate eased concerns about the labor market’s weakness. The TSX Composite Index surpassed Thursday’s record by climbing 168.91 points, closing at 24,471.17. This marked the index’s fifth consecutive weekly gain, with a rise of 308 points, or 1.28%, over the week. Meanwhile, the Canadian dollar slipped by 0.12 cents to 72.62 cents U.S. On the economic front, Statistics Canada reported that the economy added 47,000 jobs in September, and the unemployment rate dropped by 0.1 percentage points to 6.5%. However, building permits for August fell by $858.1 million, or 7.0%, to $11.5 billion.
The pan-European STOXX Europe 600 Index rose 0.66% in local currency terms, driven by optimism that the European Central Bank (ECB) might accelerate interest rate cuts and that China could boost its economic stimulus. Major European stock indexes saw gains, with Italy’s FTSE MIB up 2.13%, Germany’s DAX rising 1.32%, and France’s CAC 40 adding 0.48%. However, the U.K.’s FTSE 100 Index slipped by 0.33%. According to minutes from the ECB’s September meeting, the bank reiterated its expectation that inflation would slow toward the 2% target by the end of the year. The ECB suggested that a gradual reduction in borrowing costs would be appropriate if inflation data meets its projections, although officials emphasized that they would not commit to a specific rate path. Recent comments from ECB officials align with market expectations for a quicker pace of policy easing as inflation declines and the economy weakens.
According to the Federal Reserve, U.S. consumer credit increased by $8.9 billion in August, following a significant rise of $26.6 billion in July. This represents a 2.1% annual growth rate in August, down from 6.3% the previous month. Economists had anticipated a larger $13.2 billion increase. Key details show that revolving credit (such as credit cards) decreased by 1.2%, marking its second small decline in three months, while non-revolving credit (including auto and student loans) grew by 3.3%. Consumer spending continues to drive economic growth, supported by a strong labor market, with 254,000 jobs added in September. Additionally, revisions to GDP data indicate that households have more savings than previously thought, with the U.S. savings rate at 4.8% in August. Economists expect non-revolving credit to rebound later in the year as lower interest rates reduce borrowing costs. However, the slight dip in borrowing could indicate that consumer credit growth has stabilized, which might help address rising credit delinquencies without affecting spending levels.1
For the week ending October 5, initial claims for seasonally adjusted unemployment benefits rose to 258,000, marking an increase of 33,000 from the previous week’s unchanged level of 225,000. This is the highest number of initial claims since August 5, 2023, which was also 258,000. The four-week moving average climbed to 231,000, up 6,750 from the prior week’s average of 224,250. For the week ending September 21, the total number of continued weeks claimed across all benefit programs was 1,637,000, a decrease of 14,701 from the previous week. In the same week in 2023, 1,609,953 claims were filed.2
A key measure of consumer inflation rose slightly faster than expected in September, which could complicate the Federal Reserve’s plan to cut U.S. interest rates two more times this year. The government reported on Thursday that the “core” consumer price index (CPI), which excludes volatile food and energy prices, increased by 0.3% for the second consecutive month. Wall Street analysts had anticipated a smaller 0.2% rise. Over the past year, the core inflation rate ticked to 3.3%, from 3.2% in the previous month, marking the first increase in 18 months. This suggests inflation remains persistent in certain key areas of the economy. The broader consumer price index, which includes all goods and services, rose by 0.2% in September, also slightly above expectations. On an annual basis, overall inflation slowed to 2.4%, the lowest rate since February 2021, down from 2.5%. The Fed places more weight on the core CPI as a better indicator of long-term inflation trends, as food and gas prices tend to fluctuate sharply in the short term. Despite this, the Fed is still expected to continue cutting interest rates, although it’s unclear if it will “pause” in November to assess further data before making another cut. The central bank remains more concerned about the weakening labor market and wants to prevent a significant rise in the unemployment rate. 3
U.S. consumer sentiment declined in October as ongoing frustration over high prices persisted, according to a survey released on Friday. The University of Michigan’s preliminary reading on the overall consumer sentiment index fell to 68.9 in October, down from 70.1 in September. Economists surveyed by Reuters had expected an initial reading of 70.8. “Although inflation expectations have significantly eased, consumers remain frustrated by high prices,” said Joanne Hsu, Director of the Surveys of Consumers. She noted that while the outlook for long-term business conditions reached its highest level in six months, perceptions of current and expected personal finances weakened slightly. The survey’s one-year inflation expectations rose to 2.9% from 2.7% in September, while the five-year inflation outlook edged down to 3.0% from 3.1%. “With the upcoming election approaching, some consumers seem to be holding off on making judgments about the longer-term economic trajectory,” Hsu added.4
WK | Year to Date | |
Dow | 1.21% | 13.73% |
S&P500 | 1.11% | 21.91% |
Nasdaq | 1.13% | 22.19% |
S&P400 Mid-cap | 1.13% | 13.38% |
Russell | 0.98% | 10.23% |
TSX | 1.30% | 16.80% |
Oil | 1.60% | 5.50% |
- https://www.federalreserve.gov/releases/g19/20241007/
- https://www.dol.gov/ui/data.pdf
- https://www.bls.gov/news.release/cpi.nr0.htm
- https://www.barrons.com/livecoverage/stock-market-today-101124/card/consumer-sentiment-weakens-slightly-to-start-october-BsVBTZhj6TZyL82HPPda
Important Information:
Warren Gerow is an independent investment wealth consultant to Sightline Wealth Management.
Sightline Wealth Management LP (“Sightline”) is an investment dealer and is a member of the Canadian Industry Regulation Organization (CIRO) and the Canadian Investor Protection Fund (CIPF).
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