Published October 11, 2024
Below we summarize from a recent Blaine Rollins post to highlight the ripple effect of last week’s surprisingly positive monthly jobs report.
“Nothing like a positively surprising set of economic numbers to put everyone in a good mood. The 4.05% unemployment rate combined with a +100k beat in the non-farm payroll figure is going to put the Fed’s dour year end jobs projections in jeopardy. Say goodbye to any thoughts of a 50 basis point rate cut in November. It wasn’t a perfect report, and it was only one number, but if you are a consumer centric business manager looking toward the holidays, then Friday’s report got your attention. Maybe time to find some more inventory and a few more employees to bet on a consumer pickup?
With the consumer responsible for generating two-thirds of the U.S. economy, the stronger than expected jobs data should lift GDP and corporate earnings forecasts. This would be expected to flow through to improved company valuations and higher equity and credit prices. The next potential bump in the road would be if the rebound in economic strength was enough to reverse the downward trend in inflation. This week’s CPI & PPI numbers will give us a look at all the new price trends, but for now, wages are continuing to grow faster than the prices of most goods.”
The upside surprise in hiring rippled through all kinds of economic and market projections. Goldman Sachs cut their recession probability back to the “normal” 15%.
Then proceeded to raise their outlook for the stock market:
The Citi economic surprise index also bounced back strongly. In short, the pessimism caused by the weaker summer data was reversed.
All good news as the stock market heads into what historically has been a very positive period – post-election. We just need to election to get behind us!
Market Update
After closing the prior week on a high from the monthly jobs report, stocks fell back a bit to begin this week. The S&P 500 slipped -1% as interest rates continued rebounding from a four month downdraft. Tuesday saw stocks recover Monday’s lost ground despite a selloff in China and commodity-related shares. Investors were disappointed that a news conference by Chinese government planners failed to outline additional economic stimulus. That negative in the market was more than offset by a sudden return to favor in the Mag 7 tech/consumer stocks. Money rotated out of recent China/cyclical winners to fund the move. Further, rising interest rates have taken some of the wind out of rallies in rate-sensitive sectors like utilities and consumer staples. That shift continued Wednesday with semiconductor and software stocks leading the market +1% higher. Stocks ran in place Thursday with the most recent inflation report offering no real new information. Financial stocks took flight Friday after earnings from JP Morgan and investment firm Blackrock both noted the economy’s strength. JP Morgan’s CFO went so far as to announce that the U.S economy had achieved the hoped-for “soft landing”. The +2% rise in finance shares propelled the market solidly upward. `
Stocks notched another weekly gain and record close this week with the S&P 500 rising +1.15%. The Nasdaq 100 (QQQ) added +1.24%. Small caps used the Friday surge in regional banks to overcome a slump earlier in the week to close with a positive +0.96% lift.
Warm wishes and until next week.