What We Are Watching This Week
- Factory Orders
- ISM Services
- Consumer Credit
Highlights From Last Week
- US Consumer Confidence
- Job Openings
- ADP Employment
- PCE Index
The major U.S. stock indexes ended mostly lower after a busy week of economic and earnings reports. The Nasdaq Composite and S&P MidCap 400 Index hit record highs mid-week but declined sharply on Thursday. Growth stocks, particularly tech giants like Meta Platforms and Microsoft, underperformed relative to value stocks due to cautious earnings. Small-cap stocks outperformed large-caps. Around 42% of S&P 500 companies were expected to report Q3 earnings, including major tech firms Alphabet, Apple, Amazon, Meta, and Microsoft. Analysts projected a 5.1% year-over-year earnings growth for the S&P 500, an improvement from the initial 4.3% forecast.
Toronto markets closed higher on Friday, led by consumer and healthcare stocks gains, ending a mostly down week. The TSX rose 98.29 points to finish at 24,255.16, though it posted a weekly loss of 208 points or 0.85%. The Canadian dollar inched up by 0.05 cents to 71.81 cents U.S. Economically, Canada’s Manufacturing PMI increased to 51.10 in October from 50.40 in September, above the long-term average of 52.33 (2011-2024). The index peaked at 58.90 in March 2022 and a low of 33 in April 2020.
The pan-European STOXX Europe 600 Index dropped 1.52% amid concerns over potential Middle East conflict escalation, weak corporate earnings, and softened expectations for ECB rate cuts. Major indexes also fell, with France’s CAC 40 down 1.18%, Germany’s DAX down 1.07%, Italy’s FTSE MIB down 1.42%, and the U.K.’s FTSE 100 down 0.29%. In economic news, the eurozone’s Q3 growth rate doubled to 0.4%, surpassing expectations of 0.2%. Germany narrowly avoided recession with 0.2% growth, while France and Spain also showed robust performance, though Italy’s growth stalled. Annual inflation rose to 2% in October, with core inflation stable at 2.7%.
On Tuesday, the US Labor Department reported that US job openings dropped to 7.443 million in September, the lowest since January 2021, marking a significant easing in labor demand. August’s figures were revised down to 7.861 million from the originally reported 8.040 million, falling short of the 8.00 million job openings expected by economists. Hires increased by 123,000 to 5.558 million, while layoffs rose by 165,000 to 1.833 million. Disruptions from hurricanes and strikes may obscure labor trends, with nonfarm payroll gains projected to slow to 115,000 in October from 254,000 in September. Despite the labor market changes, the Federal Reserve is expected to cut interest rates by 25 basis points next month, following a prior 50-basis-point reduction in September that brought rates to 4.75%-5.00%, aiming to curb inflation after significant rate hikes in 2022 and 2023.1
The Conference Board Consumer Confidence Index® rose sharply in October to 108.7 from 99.2 in September, marking the strongest monthly gain since March 2021. The Present Situation Index, reflecting consumers’ views on current business and labor market conditions, rose by 14.2 points to 138.0. At the same time, the Expectations Index, indicating short-term outlooks, increased by 6.3 points to 89.1, well above the recession-warning threshold of 80. All components of the Index improved, with consumers more positive about business conditions, job availability, and future income. Confidence grew across all age groups, with the largest increase among those aged 35 to 54, and remained highest among those under 35 and households earning over $100K.2
In October, private job creation surged to 233,000, the highest level in over a year, despite severe storms in the Southeast and labor disruptions, according to ADP. This figure far exceeded the 113,000 job growth forecast, with strong hiring across sectors like education and health services, trade, transportation, and utilities. Wages also rose 4.6% year-over-year. Job gains were led by large companies with over 500 employees, while small businesses contributed minimally. Manufacturing was the only sector to see job losses, mainly due to a Boeing strike. The report contrasts with expectations of a slowdown and precedes the Bureau of Labor Statistics’ nonfarm payroll report, projected to show 100,000 new jobs and a stable 4.1% unemployment rate.3
The U.S. economy grew at a solid 2.8% annual rate in the third quarter, primarily driven by strong consumer spending, which rose at a 3.7% pace—the largest increase in six quarters. This growth builds on a 3.0% rise in GDP in the second quarter, extending a four-year economic expansion. Although economists had forecast a slightly higher 3.1% growth, the expansion would have been stronger if not for a higher trade deficit and a smaller rise in inventories. Government spending and business investment also contributed to the GDP increase, offsetting some of the negative effects from the trade deficit and inventory changes.4
On Thursday, according to the Bureau of Economic Analysis, U.S. prices rose modestly in September, with the Fed’s preferred PCE index increasing by 0.2%, which aligned with forecasts. Annual inflation eased to 2.1%, slightly above the Fed’s 2% target. However, the core rate, which excludes food and energy, rose by 0.3%, marking the largest increase in six months and remaining steady at 2.7% annually. The core rate’s persistence keeps it on the Fed’s radar as a key indicator of inflation trends. Despite this, the Fed is expected to cut interest rates again to support the economy and prevent a labor market slowdown, though it may proceed cautiously if core inflation doesn’t ease further.5
For the week ending October 26, the US Department of Labor reported that seasonally adjusted initial jobless claims reached 216,000, marking a decrease of 12,000 from the prior week’s revised figure of 228,000 (initially reported as 227,000). The 4-week moving average dropped to 236,500, down by 2,250 from the previous week’s revised average of 238,750 (initially reported as 238,500). For the week ending October 12, continued claims across all benefit programs totaled 1,651,568, an increase of 30,106 from the previous week. By comparison, there were 1,597,654 claims filed in the same week of 2023.6
In October, U.S. job growth slowed significantly, with only 12,000 new jobs added—the smallest increase since December 2020, according to the US Department of Labor. Employment gains were constrained by a Boeing strike and hurricanes Helene and Milton, which collectively cut an estimated 94,000 jobs. Despite the slower hiring, the unemployment rate remained steady at 4.1%. Job growth has generally slowed since spring as companies control costs, though the labor market remains robust enough to sustain economic expansion. With inflation near pre-pandemic levels, the Federal Reserve is expected to cut interest rates soon, focusing on supporting a strong labor market. Economists had anticipated an increase of 110,000 jobs for October.
In October, the U.S. job market saw notable sector-specific changes. Health care added 52,000 jobs, primarily in ambulatory health services (+36,000) and nursing/residential care facilities (+9,000). Government employment continued to rise, adding 40,000 jobs, mainly at the state level (+18,000). Professional and business services faced a decline, with temporary help services losing 49,000 jobs. Manufacturing dropped by 46,000 jobs, largely in transportation equipment due to strike activity. Construction employment rose slightly (+8,000), led by non-residential specialty trade contractors (+14,000). Other sectors, including retail, transportation, and leisure, saw little change. Average hourly earnings increased by 0.4% to $35.46, marking a 4.0% annual increase, with nonsupervisory employees earning $30.48. The average workweek remained steady at 34.3 hours, with manufacturing at 39.9 hours. Revisions to August and September data lowered previously reported job gains by a combined 112,000 due to updated business reports and seasonal adjustments.7
| WK | Year to Date | |
| Dow | -0.15% | 11.58% |
| S&P500 | -1.37% | 20.10% |
| Nasdaq | -1.50% | 21.51% |
| S&P400 Mid-cap | -0.15% | 11.55% |
| Russell | 0.10% | 9.03% |
| TSX | -0.85% | 15.70% |
| Oil | -3.10% | -2.90% |
- https://www.bls.gov/news.release/jolts.nr0.htm
- https://www.conference-board.org/topics/consumer-confidence
- https://adp-ri-nrip-static.adp.com/artifacts/us_ner/20241030/ADP_NATIONAL_EMPLOYMENT_REPORT_Press_Release_2024_10%20FINAL.pdf
- https://www.bea.gov/data/gdp/gross-domestic-product
- https://www.bea.gov/news/2024/personal-income-and-outlays-september-2024
- https://www.dol.gov/ui/data.pdf
- https://www.bls.gov/news.release/pdf/empsit.pdf
Important Information:
Warren Gerow is an independent investment wealth consultant to Sightline Wealth Management.
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