Weekly Market Commentary October 28th to November 1st 2024

October’s Unemployment Report was expected to provide at least some useful data for the Federal Reserve in advance of their upcoming rate decision, but a report muddied by major weather events and a labor strike gave little insight. Headline numbers were negatively impacted by both Hurricane Helene and Milton as well as the Boeing union workers’ strike. U.S. Payrolls increased by just 12k (well below the 100k estimate) while the Unemployment Rate held steady at 4.1%, in line with expectations. The Bureau of Labor Statistics Household Survey estimated 512k employees were unable to work due to bad weather while another 44k Boeing workers were on the picket line seeking higher wages. Unfortunately, due to the discrepancies in surveys these figures cannot be added to the headline number and make for a difficult read-through. The report provided substantial downward revisions from the previous two months, with net revisions lower by 112k. Although a sign of weakness, downward revisions have been a theme throughout the year.

Released on Wednesday, the Bureau of Economic Analysis Gross Domestic Product (GDP) report confirmed further U.S. expansion in the third quarter of the year despite elevated interest rates and worries of growing fiscal deficit and slow to start monetary accommodation. GDP grew a healthy 2.8% on an annualized basis in the third quarter, below the 3.1% estimate. The consumer remained robust with spending increasing by 3.7%, the best reading since the first quarter of last year. Recent consumer sentiment measures would imply a pullback in spending, but this has yet to materialize. Federal government spending also contributed to the growth, which increased 9.7% led by an increase in defense.

The Federal Reserve’s preferred gauge of inflation, the Personal Consumption Expenditures Price Index (PCE), hit 2.1%, nearing their 2.0% target. Inflation continues to be hot in the services sector with prices increasing 0.3% while good prices decreased 0.1%, the fourth deflationary figure in the past five months.

Earnings season is in full swing. In the busiest week of the quarter, 170 S&P 500 companies reported including Apple, Microsoft, Alphabet and Meta Platforms. Overall earnings were solid, but reactions were mixed. U.S. equities pulled back slightly from all-time record highs finishing the week at 5,731, a decline of 1.4% while the yield on the 10-Year U.S. Treasury was up 15 bps to 4.38%.

All eyes will be focused on the U.S. Presidential Election and the FOMC Interest Rate decision next week. ISM Manufacturing Index is the primary economic data point being released.