1. Stock Market Reaches New Heights
The week ended with major U.S. stock indexes inching to new record highs. The S&P 500 and Dow Jones Industrial Average surpassed their previous week's records, while the NASDAQ remained 2.7% below its all-time high set three months ago. Despite daily fluctuations, a modest Friday rally pushed indexes into positive territory for the week.
Key Takeaway: The market's resilience continues, with stocks maintaining their upward trajectory despite various economic factors at play.
2. Job Market Surprises with Robust Growth
September's employment report delivered a significant surprise, with 254,000 new jobs added to the U.S. economy. This figure far exceeded the consensus forecast of 140,000 and marked the strongest job growth in six months. The unemployment rate also ticked down to 4.1% from 4.2% in August, while previous months' figures saw upward revisions.
Key Takeaway: The labor market's unexpected strength may influence the Federal Reserve's future policy decisions.
3. Treasury Yields Respond to Strong Jobs Data
The robust jobs report had an immediate impact on the bond market. The 2-year Treasury yield surged from 3.70% on Thursday to 3.92% by Friday's close, up from 3.56% at the end of the previous week. This sharp increase reflects a shift in investor expectations regarding the Federal Reserve's interest rate policy.
Key Takeaway: Strong economic data is tempering expectations for aggressive rate cuts in the near term.
4. Oil Prices Surge Amid Geopolitical Tensions
Crude oil prices saw a significant uptick, rising about 9% over the week to reach nearly $75 per barrel. This surge, driven by escalating tensions in the Middle East, brought oil prices to their highest level since late August, though still below the recent July peak of $83.
Key Takeaway: Geopolitical events continue to play a crucial role in commodity markets, with potential ripple effects across the broader economy.
5. Energy Sector Leads Market Gains
The rise in oil prices provided a boost to energy stocks, making the sector the top performer among S&P 500 sectors for the week. Energy stocks posted an average gain of 7%, significantly outpacing other sectors.
Key Takeaway: Sector rotation continues to be a key theme, with external factors driving performance disparities.
6. September Market Performance Recap
September proved to be another positive month for U.S. stocks, mirroring August's pattern of early losses followed by a strong recovery. The S&P 500 closed the month at a record high, posting a total return of 2.1%. This marks the tenth positive month out of the past eleven for the index.
Key Takeaway: Despite ongoing concerns about valuation and economic headwinds, the market has shown remarkable consistency in delivering positive returns.
7. Earnings Season on the Horizon
As the third-quarter earnings season approaches, with major banks set to report on October 11, analysts are projecting average earnings growth of 4.2% for S&P 500 companies. If realized, this would mark the fifth consecutive quarter of year-over-year earnings growth.
Key Takeaway: Corporate earnings continue to show resilience, potentially supporting current market valuations.
8. Inflation Data in Focus
The upcoming Consumer Price Index (CPI) report, scheduled for release on October 10, will be closely watched by investors and policymakers alike. Following the Federal Reserve's recent interest rate cut, the report will provide crucial insight into whether the cooling trend in inflation continued into September. The previous month's annual rate of 2.5% was the lowest since February 2021.
Key Takeaway: Inflation data remains a key driver of monetary policy and market sentiment, with potential implications for future Fed decisions.
Next week, all eyes will be on the CPI report and the kickoff of earnings season. These events could provide significant insight into the health of the economy and corporate America, potentially setting the tone for market performance in the final quarter of 2024.
