Weekly Market Commentary September 30th to October 4th 2024

Friday’s September jobs report was the big release for the week. With the Fed shifting their main concern from fighting inflation to the weakening employment situation, all eyes were on the Nonfarm Payrolls report, and it did not disappoint. Expectations of 145,000 newly created jobs was seen by some as optimistic, but when the actual number of 254,000 came in along with a 4.1% unemployment rate, sentiment immediately shifted to thoughts of the labor market concerns being overblown. With the prior two months being revised upward by 47,000; the YoY Average Hourly Earnings coming in at a much stronger 4.0%; and the jump in JOLTS Job Openings to over 8 million, the chances of another 50 bps short-term rate cut in November plummeted. The Fed doesn’t usually look at singular points of data in isolation, and we will get another employment report prior to their November decision, but this will likely shift their thinking slightly back to the concerns of inflation. Remember, they have a dual mandate of both maximum employment and price stability.

Elsewhere in the economy this week, the Institute of Supply Management (ISM) released their manufacturing and services indices for September. Manufacturing came in at 47.2 which implies contraction and was slightly under the 47.6 expectation. Services, however, continued expanding and came in at 54.9 when 51.6 was anticipated. The ISM Manufacturing Index should be bolstered eventually by the anticipated series of Fed rate cuts, but we’ll be keeping an eye on this metric as a recessionary indicator.

In the markets, the strong jobs numbers on Friday provided the rally the equity indices needed to eke out small gains for the week. The S&P 500 finished up 0.2%, while the Dow Jones Industrials and NASDAQ both closed up 0.1%. In fixed income, the yield curve flattened, and yields were up sharply on the week with the 2-Year U.S. Treasury closing at 3.93%, the 10-Year at 3.98%, and the 30-Year at 4.26%.

Speaking of inflation, next week’s key economic releases include Consumer (CPI) and Producer (PPI) Prices for September, along with a heavy slate of Fed speakers. These speeches can provide plenty of between-meeting insight into the Fed’s thinking and are often used to signal their intentions.