Daily market snapshot

Published October 11, 2024
 Woman on couch looking at laptop

Friday, 10/11/2024 p.m.

  • Markets move higher: U.S. stock markets were higher on Friday, with the S&P 500 outperforming the technology-heavy Nasdaq. Sector leadership was driven by financials, which benefited from strong earnings reports from big banks like JPMorgan and Wells Fargo. Financials and industrials were the best-performing sectors of the day, while the lagging sectors included technology and consumer discretionary*. This is in line with the sector trends over the past several weeks, in which cyclical sectors have outperformed technology and growth sectors broadly. In our view, this broadening of market leadership likely has legs, especially as the Federal Reserve continues its rate-cutting cycle and as earnings growth is driven by both tech and nontech parts of the market.
     
  • U.S. producer price index (PPI) inflation comes out in line with forecasts: PPI inflation data for August was in line with expectations. Headline PPI was flat month-over-month, while core PPI was up 0.2% month-over-month. Services inflation was the primary driver of the inflation reading, which was up by 0.2% monthly, while goods inflation actually decreased by 0.2%*. Within goods, energy and gasoline prices were a large contributor to the decline in prices*. Overall, the PPI inflation was in line with yesterday's CPI inflation reading, which continues to trend lower overall, but which has seen some more-persistent-than-expected components, particularly in services inflation. In our view, with CPI inflation now at 2.4% year-over-year, the last mile to the Fed's 2.0% target may be bumpy, but there are drivers that will likely continue to support a gradual move lower. These include lower wage gains over time, which should support lower services inflation, as well as an eventual move lower in the shelter and rent components of the basket.
     
  • Earnings season kicks off on a strong note: The third-quarter earnings season kicked off in earnest on Friday, with big banks such as JPMorgan and Wells Fargo reporting earnings. JPMorgan noted in its reporting that consumers are "fine and on strong footing," and posted record net income figures and raised full-year guidance*. Meanwhile, Wells Fargo also topped analyst forecasts of earnings expectations and noted a more diverse set of revenue streams that helped offset a decrease in net interest income. The financial sector was the top-performing sector of the day on Friday as well. Overall, third-quarter expectations are for about 4.2% year-over-year earnings growth for the S&P 500, well below the 7.7% expectation in place at the end of June*. In our view, the downward revisions in earnings expectations for this quarter has set the bar lower and provides corporations an opportunity to once again beat earnings forecasts and raise guidance. This has been the case thus far with some of the early reporting from the big banks.

Mona Mahajan
Investment Strategy 

Source: *FactSet

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