MARKET UPDATE: EMPIRE STATE MANUFACTURING SURVEY, US RETAIL SALES, INDUSTRIAL PRODUCTION, HOUSING STARTS

What We Are Watching This Week

  • US Leading Economic Indicators 
  • Existing Hone Sales 
  • S&P Flash US Manufacturing and Service PMI 
  • Durable Goods 

Highlights From Last Week

  • Empire State Manufacturing Survey
  • US Retail Sales
  • Industrial Production
  • Housing Starts

The S&P 500 Index advanced, led by utilities and real estate sector gains. Energy stocks declined as oil prices dropped, with reduced concerns over potential Israeli attacks on Iran’s oil infrastructure. Small-cap stocks, represented by the Russell 2000 Index, and mid-cap stocks in the S&P MidCap 400 Index outperformed. After underperforming earlier in the week, the Nasdaq Composite rallied on Friday, boosted by strong quarterly earnings from Taiwan Semiconductor Manufacturing, which reignited interest in AI-related stocks. The tech-heavy index also benefited from better-than-expected earnings reports, with Netflix exceeding expectations by growing its subscriber base and expanding operating margins in the third quarter. 

Stocks surged across North America on Friday, driven by expectations of significantly lower interest rates in the coming weeks. The TSX Composite Index jumped 132.06 points to finish a shortened trading week at 24,822.54, marking a gain of 351 points, or 1.44%, for the week. Markets in Canada closed on Monday for Thanksgiving. The Canadian dollar dipped slightly, losing 0.07 cents to 72.42 cents U.S. With the Bank of Canada’s policy meeting set for next week, investor expectations have risen for a larger-than-usual rate cut following lower-than-expected inflation data on Tuesday. Traders are heavily betting on a 50-basis-point rate cut at the October 23 meeting, with odds of 91.7%. A larger rate cut could significantly boost the domestic economy, as annual inflation has fallen below the central bank’s 2% target. 

In Europe, the STOXX Europe 600 Index rose by 0.58%, driven by the European Central Bank’s (ECB) second consecutive interest rate cut, which fueled expectations for further monetary easing. Major European markets posted gains, with Italy’s FTSE MIB up 2.61%, Germany’s DAX rising 1.46%, France’s CAC 40 gaining 0.46%, and the UK’s FTSE 100 advancing 1.27%. The ECB cut its key deposit rate by 0.25% to 3.25%, marking the first back-to-back rate reductions in 13 years. ECB President Christine Lagarde noted that disinflationary trends were progressing well, and markets anticipated another rate cut in December to support economic growth. Eurozone inflation was revised lower to 1.7% for September, down from an initial estimate of 1.8%, and remains below the ECB’s 2% target. Inflation is expected to rise temporarily before falling back toward the target next year. 

According to the Federal Reserve Bank of New York, business activity in New York State saw a slight contraction, according to firms surveyed for the October 2024 Empire State Manufacturing Survey. After moving into positive territory last month, the general business conditions index dropped by 23 points to -11.9. Both new orders and shipments declined, while delivery times shortened slightly, and supply availability worsened somewhat. Inventories decreased. On a positive note, labor market conditions improved with a slight increase in employment and the average workweek for the first time in a year. Input and selling prices increased modestly but at a slightly quicker pace. Despite the overall weakening of business conditions, firms expressed significantly greater optimism about the six-month outlook.1 

For the week ending October 12, the U.S. Labor Department reported seasonally adjusted initial jobless claims came in at 241,000, down 19,000 from the previous week’s revised figure. The prior week’s number was revised upward by 2,000, from 258,000 to 260,000. The four-week moving average rose to 236,250, an increase of 4,750 from the previous week’s revised average, which was adjusted from 231,000 to 231,500. For the week ending September 28, the total number of continued claims across all benefit programs reached 1,637,496, an increase of 496 from the previous week. In comparison, there were 1,579,345 weekly claims during the same period in 2023.2 

The U.S. Census Bureau reported Thursday advance estimates for U.S. retail and food services sales in September 2024, adjusted for seasonal variations, holiday, and trading-day differences (but not for price changes, totaling $714.4 billion. This represents a 0.4 percent increase from the previous month and a 1.7 percent rise compared to September 2023. Sales from July through September 2024 increased by 2.3 percent compared to last year. From July to August 2024, the percentage change remained unrevised at 0.1 percent. Retail trade sales grew by 0.3 percent from August 2024 and increased by 1.4 percent from the previous year. Notably, non-store retailers saw a 7.1 percent rise year-over-year, while food services and drinking places reported a 3.7 percent increase compared to September 2023.3 

Industrial production (I.P.) declined by 0.3 percent in September, following a 0.3 percent increase in August, as the U.S. Federal Reserve reported. The September decline was impacted by a strike at a significant civilian aircraft manufacturer, which reduced total I.P. growth by an estimated 0.3 percent, along with the effects of two hurricanes, subtracting about 0.3 percent. For the third quarter overall, industrial production fell at an annual rate of 0.6 percent. Manufacturing output dropped by 0.4 percent in September, while mining decreased by 0.6 percent. In contrast, utilities saw a 0.7 percent gain. At 102.6 percent of its 2017 average, total industrial production in September was 0.6 percent lower than in the same month last year. Capacity utilization also edged to 77.5 percent, 2.2 percentage points below its long-term average (1972–2023).4 

In September, U.S. housing starts fell by 0.5% month-on-month to an annualized 1.35 million units, aligning with expectations. The decline was driven by a 9.4% drop in multi-family starts, while single-family starts rose by 2.7%. Residential permits also declined by 2.9% to 1.43 million units, with single-family permits showing a slight 0.3% increase for the third consecutive month, while multi-family permits fell by 9.0%. Regionally, only the Northeast saw an increase in housing starts, while the West, Midwest, and South all experienced declines. The slowdown in multi-family construction is a result of recalibrating supply pipelines, with units under construction down 16.5% year-over-year. In contrast, single-family starts have been trending upward after a weak first half of the year. Homebuilder sentiment for single-family homes improved in October, but rising mortgage rates, driven by stronger-than-expected economic data, could dampen growth in homebuilding. Additionally, upcoming data may show volatility due to the impacts of Hurricanes Helene and Milton. However, with the Federal Reserve expected to continue cutting interest rates through 2025, homebuilding is forecasted to improve steadily into the new year.5   

WKYear to Date
Dow0.96%14.82%
S&P5000.85%22.95%
Nasdaq0.80%23.17%
S&P400 Mid-cap1.41%14.98%
Russell1.87%12.28%
TSX1.40%18.40%
Oil-8.90%-4.00%
  1. https://www.newyorkfed.org/medialibrary/media/Survey/Empire/empire2024/ESMS_2024_10.pdf?sc_lang=en&hash=24E109A4EB0D4D7F4592F781190B5AE3 
  2. https://www.dol.gov/ui/data.pdf 
  3. https://www.census.gov/retail/marts/www/marts_current.pdf 
  4. https://www.federalreserve.gov/releases/g17/current/ 
  5. https://fred.stlouisfed.org/series/HOUST

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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