Daily market snapshot

Tuesday, 10/29/2024 p.m.

• Stocks closed mixed on Tuesday: The S&P 500 and technology-heavy Nasdaq closed higher on Tuesday, while the Dow Jones closed lower. Stocks broadly have had a strong year, with the S&P 500 up over 22% this year. The Nasdaq is up over 24%, while the Dow Jones index is up about 12%.* Meanwhile, despite today's move lower in yields, Treasury bond market returns have come under pressure in recent weeks, as Treasury yields have climbed. The 10-year Treasury yield is now over 4.25%, well above its recent September lows of around 3.6%.* For investors with balanced or diversified portfolios, returns will likely be a blend of higher equity performance and more modest bond-market returns this year thus far.
• Corporate earnings season continues, with mega-cap tech on deck: About 40% of S&P 500 companies have reported third-quarter earnings thus far, with results that have been modest overall. The year-over-year earnings growth rate has been about 4.1%, in line with lowered estimates at the start of the quarter, and well below last quarter's growth rate of around 11%.* This week, a slew of mega-cap companies will report earnings, including Apple, Amazon, Alphabet (Google) and Meta. Investors will be listening for updates on spending plans around artificial intelligence (AI) and data-center capacity, as well as any progress made toward AI use cases across sectors.
• U.S. labor-market report due on Friday: Investors will be paying close attention to Friday's U.S. nonfarm-jobs report for October. Expectations are for total jobs added to fall to 120,000, well below last month's 254,000 jobs added, in part driven by recent strikes and natural disasters.* The unemployment rate is expected to stay steady at 4.1%, which would remain below the highs of this year of 4.3%.* The wage-gains figures, or average hourly earnings, are expected to tick modestly lower to 0.3% month-over-month, versus last month's 0.4% gain.* This easing in wage growth would be a welcome sign of less pressure on services inflation, which is in large part driven by labor costs. Overall, we believe the labor market may be gradually normalizing from a period of outsized strength after the pandemic period, but signs point to a healthy U.S. jobs market overall.

Mona Mahajan 
Investment Strategy

^{Source: *FactSet} 

Monday, 10/28/2024 p.m.

• Stocks close higher: Major equity markets started the week higher, with small- and mid-cap stocks leading large-cap stocks. Sector performance was broad, as financial and materials stocks posted the largest gains. Bond yields continued their trend higher, with the 10-year Treasury yield near 4.27%, up more than 60 basis points (0.6%) from the recent low in September. In global markets, Asia was up, as Japan's ruling political coalition lost its majority in the election, bolstering the view that the resulting uncertainty could further delay interest-rate hikes by the Bank of Japan*. The U.S. dollar advanced versus major currencies. In the commodity space, WTI oil traded lower, as Iran's energy infrastructure was not damaged in Israel's strikes over the weekend.
• Markets focused on the labor market and inflation this week: The core personal consumption expenditures (PCE) price index – the Federal Reserve's (Fed) preferred inflation measure – will be released on Thursday, with forecasts calling for 2.6% annualized inflation through September, down from 2.7% the prior month. Headline PCE is expected to decline to 2.0%, from 2.2% in August. Continued progress toward the 2% target for core inflation should keep the Fed on its rate-cutting path for the next several months, in our view. The jobs report for October will be released on Friday, November 1, with expectations for 125,000 new jobs created, down from 254,000 in September, which was well above estimates. Unemployment is forecast to hold steady at 4.1%, well below the long-term average of about 5.7%**. We believe the labor market is gradually normalizing from a period of outsized strength, which should be supportive of the soft-landing outcome for the economy.
• Corporate earnings season in full swing: With 37% of companies reporting third-quarter earnings, 74% have beaten analyst estimates, with an average upside surprise of 5.8%*. Earnings growth is expected to be broad, with eight of the 11 sectors forecast to report higher earnings year-over-year*. The three sectors forecast to have lower earnings – industrials, energy and materials – represent about 14% of the market capitalization of the S&P 500*. Broadening earnings have contributed to a rotation in market leadership. Over the past six months, the utilities, real estate, financials, consumer discretionary and industrials sectors have each outperformed the communication services sector, which led markets higher earlier in the year*.

Brian Therien, CFA 
Investment Strategy

^{Source: *FactSet **U.S. Bureau of Statistics}

Friday, 10/25/2024 p.m.

• Stocks close mixed: Equity markets closed mixed on Friday, with the technology-heavy Nasdaq moving higher, while the broader S&P 500 moved modestly lower. From a sector perspective, technology and consumer discretionary stocks led the way higher. The laggards on Friday included cyclical parts of the market, like financials and utilities. Treasury yields also added to recent gains, with the 10-year Treasury yield up about 0.04% to around 4.24%*. Yields are well above their September low levels of about 3.61%*. This climb in yields comes as recent U.S. economic data has exceeded expectations, putting some upward pressure on yields and some downward pressure on stock markets, particularly interest-rate-sensitive sectors like real estate. Investors will look toward next Friday's U.S. jobs report for the next signal on the health of the labor market and broader consumer demand.
   
• Earnings season delivers modest results thus far: About 36% of S&P 500 companies have reported third-quarter earnings so far, and the results have been mixed. Among these companies, 74% have beaten earnings expectations, which is in line with the 10-year average but below the five-year average of 77%. In addition, earnings growth thus far is on track for about 3.4% year-over-year, which is somewhat below the 4.1% expected at the beginning of the quarter*. The sectors that have had the biggest upside surprises in earnings include financials and utilities, in addition to consumer discretionary stocks. This underscores the recent broadening of market leadership that has been playing out in the stock markets. Next week, however, large-cap technology companies, including Apple, Microsoft, Alphabet (Google) and Amazon all report earnings, which should provide a good read into the state of corporate spending and artificial intelligence. In our view, over the next few quarters, the contribution to earnings growth is likely to come from both tech and nontech parts of the market, which should be supportive of further broadening of market leadership in stock markets.
   
• All eyes shift to U.S. labor market next week: The U.S. nonfarm-jobs report for October will be released on Friday, November 1, which will be the last reading on the health of the labor market ahead of the U.S. elections and the November 7 Federal Reserve meeting. Expectations are for the total number of jobs added to moderate to about 100,000, down from last month's 223,000*, in part driven by the recent natural disasters and strikes at firms like Boeing. However, the unemployment rate is expected to remain steady at 4.1%, well below the long-term U.S. average unemployment rate of 5.5% - 6%*. Average hourly earnings are also expected to tick lower, from 0.4% month-over-month to 0.3% in October*, which would be a welcome signal of lower services inflation. Overall, while the U.S. labor market has shown signs of softening, with lower job openings and quit rates, we see this as moderation from a period of outsized strength in the post-pandemic period, rather than a deep or prolonged downturn. 
   

Mona Mahajan 
Investment Strategist

^{Source: *FactSet}

• Stocks finish mixed: Equity markets finished mixed on Thursday, with the S&P 500 and Nasdaq logging gains while the Dow finished lower. The consumer discretionary sector outperformed on the day, gaining more than 3%, while most other sectors finished flat to lower.* The outperformance in consumer discretionary was driven by strong earnings results from automobile manufacturer Tesla after the market closed yesterday, which sent the stock higher by more than 20% today.* Overseas, Asian markets were mixed overnight while European markets finished the day modestly higher. After a sharp move higher in recent weeks, bond yields took a breather today, with the 10-year Treasury yield ticking lower to around 4.21%.*
   
• Jobless claims tick lower: U.S. initial jobless claims declined to 227,000 on Thursday, below expectations for 241,000 and below the prior reading of 242,000.* Today's reading of 227,000 is well below the 30-year median of over 300,000, signaling that while labor-market conditions have eased from historically tight levels, they remain healthy. Labor-market data will remain in focus in the week ahead with nonfarm payrolls and unemployment data for October out next Friday. In our view, healthy labor-market conditions should provide support to consumer spending in the months ahead and help extend the economic expansion.
   
• PMI data shows services continues to shine: Preliminary S&P Global Purchasing Manager Index (PMI) data for October showed that the services sector of the U.S. economy continues to expand at a healthy clip while manufacturing continues to lag.* The U.S. services PMI reading for October was 55.3 (reading above 50 signals expansion), which was slightly above expectations for 55.1.* The U.S. manufacturing PMI remained in contraction with a reading of 47.8, although today's reading was modestly higher than the September reading of 47.3.* With services making up the lion's share of the U.S. economy, today's reading suggests the U.S. economy continues to expand at a healthy clip.

Brock Weimer, CFA
Associate Analyst

^{Source: *FactSet}

• Stocks close lower: Equity markets closed lower on Wednesday, with corporate headlines in focus. Growth sectors of the S&P 500 lagged with information technology and consumer discretionary falling by over 1.5%.* Utilities and real estate were the only sectors of the S&P 500 to finish the day higher.* On the corporate front, shares of McDonald's were under pressure following a report from the CDC that linked an E. coli breakout to the restaurant.* Elsewhere, shares of semiconductor company Texas Instruments gained roughly 4% following strong earnings results after the market close yesterday.* Overseas, Asian markets were mixed overnight, with Japan's Nikkei posting a modest decline while markets in China were mostly higher.* On the economic front, the Bank of Canada followed in the footsteps of the Fed by lowering its policy rate by 0.5% this morning and bringing the target rate to 3.75%.* Bond yields climbed higher again on Wednesday, with the 10-year Treasury yield hovering around 4.24%, its highest since July.*
   
• Third-quarter earnings take the spotlight: With the macroeconomic calendar light this week, market focus will shift to corporate earnings. Roughly 20% of companies in the S&P 500 are slated to report earnings this week, headlined by results from Tesla, out after the market close today. Of the S&P 500 companies that have reported, roughly 77% have exceeded earnings expectations, and estimates are calling for S&P 500 earnings growth of roughly 2%.* At a sector level, information technology and communication services are expected to lead the way, with estimates calling for double-digit earnings growth in the third quarter.* Looking ahead to 2025, expectations are for the S&P 500 to grow earnings by 15% and for all 11 sectors to see positive earnings growth.* While expectations for 15% growth could prove overly optimistic, we believe the macroeconomic backdrop should remain favorable to support corporate profit growth in the quarters ahead, which should help sustain the bull market.
   
• Performance check: It's been a strong year of performance for stocks, with the S&P 500 up by 24%, including dividends, through yesterday's close.* From a leadership perspective, it's been a variety of sectors leading markets higher, unlike 2023, which was dominated by mega-cap technology companies. While information technology and communication services have been among the top performers, each up by 30% or more year-to-date, they've been far from the only game in town.** Utilities, financials and industrials have all returned more than 20% year-to-date, and all 11 sectors of the S&P 500 have returned more than 10%.** More recently, it's been the interest-rate-sensitive and cyclical sectors that have led markets higher. Utilities has been the top-performing sector over the past three months, higher by over 15%.** Financials, industrials and real estate have all seen gains of 8% or better over this time as well, while information technology and communication services have lagged behind, gaining about 4% each.** In our view, Fed interest-rate cuts, combined with healthy economic and corporate profit growth, should be supportive to equity markets in the months ahead.

Brock Weimer, CFA
Associate Analyst

^{Source: *FactSet **FactSet, GICS sectors of the S&P 500, total return. Returns through 10/22/2024.}