What We Are Watching This Week
- US Consumer Confidence
- Job Openings
- ADP Employment
- PCE Index
Highlights From Last Week
- US Leading Economic Indicators
- Existing Home Sales
- S&P Flash US Manufacturing and Service PMI
- Durable Goods
The S&P 500 Index ended the week lower, breaking a six-week winning streak. Stocks appeared to follow the lead of the U.S. Treasury market, where futures now suggest a milder pace for upcoming Fed rate cuts. Large-cap stocks outperformed small-caps, while growth stocks did better than value, with the tech-focused Nasdaq Composite Index seeing a modest gain. Tesla led the S&P 500 and outperformed the “Magnificent Seven,” preventing a steeper decline in the index. The electric vehicle giant delivered stronger-than-expected quarterly earnings and forecasted 20% to 30% vehicle sales growth for 2025. These results fueled a 22% surge in the stock on Thursday, marking its largest single-day gain in over 11 years. In contrast, Apple weighed on the broader market. Leading Wall Street analysts downgraded the stock due to lower expectations for sales of the upcoming iPhone 16.
Toronto’s equities ended the last whole week of October on a similar note to the way they began—with declines. The TSX dropped 87.88 points on Friday, closing at 24,463.67. Over the week, the index fell nearly 360 points, a 1.45% decrease. The Canadian dollar also declined, dropping 0.23 cents to 71.96 cents U.S. On the economic front, Statistics Canada reported a 0.4% increase in retail sales for August, reaching $66.6 billion. Gains were seen in four of nine subsectors, with motor vehicle and parts dealers leading the way. Meanwhile, the national housing price index remained flat for the second month in a row in September. Prices were unchanged in 12 of the 27 census metropolitan areas (CMAs) surveyed, rose in eight, and fell in seven.
The pan-European STOXX Europe 600 Index declined by 1.18% amid expectations of a slower pace in U.S. monetary easing. Major European markets also saw losses, with Italy’s FTSE MIB down 1.22%, France’s CAC 40 dropping 1.52%, Germany’s DAX falling 0.99%, and the U.K.’s FTSE 100 losing 1.31%. The eurozone’s business activity declined in October as new orders continued to decrease. The composite Purchasing Managers’ Index (PMI) stood at 49.7, slightly up from 49.6 in September, indicating continued contraction. France and Germany were the primary contributors to the ongoing economic weakness.
In September 2024, the Conference Board Leading Economic Index (LEI) for the U.S. dropped 0.5% to 99.7, continuing a declining trend with a 2.6% fall over the last six months. Factory new orders, an inverted yield curve, reduced building permits, and a weak consumer outlook drove the decline, signaling economic uncertainty into early 2025. The Coincident Economic Index (CEI) rose 0.1% to 112.9, with payroll employment, income, and trade sales slightly offsetting a dip in industrial production. The Lagging Economic Index (LAG) decreased by 0.3% in September, showing a 0.2% contraction over the past six months, reflecting mixed economic signals.1
On Wednesday, The Bank of Canada cut the overnight rate by 50 basis points to 3.75%, with the Bank Rate at 4% and deposit rate at 3.75%, supporting economic growth. Global growth is projected at 3% for the next two years, with more robust U.S. prospects and weak but recovering eurozone growth. In Canada, GDP growth was 2% in early 2023, with a slower 1.75% expected in the latter half. Inflation has declined from 2.7% in June to 1.6% in September. The Bank expects GDP to strengthen and inflation to remain near the 2% target, signaling possible further rate cuts based on data.2
In September, U.S. existing home sales declined by 1.0% from August, reaching a seasonally adjusted annual rate of 3.84 million, with a 3.5% drop compared to September 2023, according to the National Association of Realtors. Sales fell in three out of four major U.S. regions, except the West, which saw an increase. Inventory at the end of September rose to 1.39 million units, a 1.5% rise from August and 23.0% higher than the previous year, offering more choices for buyers. The unsold inventory represents a 4.3-month supply compared to 3.4 months a year ago. The median home price increased by 3.0% to $404,500, with all regions seeing price growth. Factors like increased inventory, lower mortgage rates, and steady job additions are expected to support future sales, though some buyers remain cautious before the election. Housing affordability is anticipated to improve as wage growth now surpasses home price increases despite low levels of distressed property sales.3
The U.S. Department of Labor reported that for the week ending October 19, seasonally adjusted initial unemployment claims were 227,000, a drop of 15,000 from the previous week’s revised figure of 242,000 (up 1,000 from the original 241,000). The 4-week moving average rose to 238,500, up by 2,000 from last week’s revised average of 236,500 (adjusted from 236,250). In the week ending October 5, the total continued weeks claimed for benefits across all programs were 1,621,451, a decrease of 16,058 from the prior week. In comparison, the same week in 2023 saw 1,566,413 weekly claims for benefits across all programs.4
October’s S&P flash US PMI survey indicated a strong increase in business activity, signaling a solid start to the fourth quarter. The service sector drove this growth entirely, as manufacturing output declined for the third month. Employment decreased slightly for the third month due to uncertainty ahead of the Presidential Election. However, confidence in the year-ahead outlook improved after a sharp drop in September, with companies expecting more stability post-election. The survey also noted a slowdown in inflation for input costs and prices charged, with service sector inflation cooling to its lowest level since May 2020.5
The U.S. Census Bureau reported Friday that in September 2024, new orders for manufactured durable goods in the U.S. dropped by $2.2 billion, or 0.8%, to $284.8 billion. This followed a revised 0.8% decrease in August and was slightly better than the anticipated 1% decline. The main driver of the downturn was transportation equipment, which fell by $3.1 billion, or 3.1%, to $95.4 billion, marking its third decline in the past four months. There were also decreases in orders for machinery (-0.2%), computers and electronic products (-0.3%), and capital goods (-2.8%). However, excluding transportation, new orders rose by 0.4%. When excluding defense, orders saw a 1.1% decline. Notably, orders for non-defense capital goods excluding aircraft—a key indicator of business investment plans—rose by 0.5% in September, beating market expectations of a 0.1% increase following a 0.3% rise in the previous month.6
Consumer sentiment rose for the third consecutive month, reaching its highest level since April 2024 and over 40% higher than the June 2022 low. This month’s increase was largely driven by improved buying conditions for durable goods, partly due to easing interest rates. The upcoming election is influencing consumer expectations, with a notable drop in those predicting a Harris presidency from 63% last month to 57% in October. Republican sentiment increased by 8% amid growing confidence in a Trump victory, while Democratic sentiment dipped by 1%. Independents saw a 4% rise in sentiment. Regardless of the election outcome, many consumers will likely adjust their economic outlook based on the results. Year-ahead inflation expectations remained steady at 2.7%, consistent with pre-pandemic levels. Long-term inflation expectations slightly decreased from 3.1% to 3.0%, still higher than pre-pandemic averages.7
| WK | Year to Date | |
| Dow | -2.68% | 11.74% |
| S&P500 | -0.96% | 21.77% |
| Nasdaq | 0.16% | 23.36% |
| S&P400 Mid-cap | -2.84% | 11.72% |
| Russell | -2.99% | 8.93% |
| TSX | -1.45% | 16.70% |
| Oil | 4.30% | 0.00% |
- https://www.conference-board.org/topics/us-leading-indicators
- https://www.bankofcanada.ca/2024/10/fad-press-release-2024-10-23/
- https://www.nar.realtor/research-and-statistics/housing-statistics/existing-home-sales
- https://www.dol.gov/ui/data.pdf
- https://www.pmi.spglobal.com/Public/Home/PressRelease/fbd8c9c1b8ae46e2b8bea848fa083877
- https://www.census.gov/economic-indicators/?utm_campaign=&utm_content=&utm_medium=email&utm_source=govdelivery
- http://www.sca.isr.umich.edu/
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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