Stock Market Update Thursday October 3, 2024 Stocks Slip as Middle East Tensions and Jobs Data Loom Equity markets declined today, pressured by escalating geopolitical tensions in the Middle East and caution ahead of tomorrow’s release of the September Jobs report. The S&P 500 slipped 0.17%, while the Nasdaq closed marginally lower at 0.04%, and the Russell 2000 underperformed with a 0.86% decline. Energy was the standout sector, gaining 1.6% as oil prices surged amid supply concerns. In contrast, Consumer Discretionary and Materials lagged, weighing on broader market sentiment.
Away From Stocks: Treasuries experienced selling pressure, with the 2-year and 30-year yields rising seven and four basis points, respectively, to 3.7% and 4.18%.
In commodities, WTI crude surged toward $74 per barrel, while gold pared early losses, settling at $2,657 an ounce. Bitcoin advanced towards $61,000, and the VIX spiked to 20.5, gaining nearly two points on the day, reflecting heightened market volatility.
ISM Services Rebound Signals Strengthening Economy:
The ISM Services Index posted a sharp rebound today, registering 54.9 versus the expected 51.7, after months of underperformance relative to the PMI. Manufacturing remains under the critical 50 threshold, signaling contraction, but there are potential signs of recovery as global financial conditions begin to ease, reflected in a less aggressive tightening stance. The Services ISM had been one of the few indicators suggesting a more pronounced economic slowdown. However, today’s stronger-than-expected reading aligns more closely with the PMI, signaling that growth momentum may be more resilient than previously anticipated.
Despite three sessions of selling pressure in October, the S&P 500 remains within 1% of its all-time highs, reached just four trading sessions ago, indicating robust underlying market strength.
Quantitative Tightening (QT) Progress Report:
Reserve Bank credit contracted by $34.3 billion over the past week, bringing the Federal Reserve's portfolio of interest-bearing assets down to $7.022 trillion. This marks a $56 billion reduction since the first week of September and represents a 21.3% decline from the March 2022 peak, highlighting the ongoing effects of Quantitative Tightening (QT).
Tomorrow Macro News: Friday, October 4 - 8:30 AM
Sep Average Hourly Earnings (AHE) m/m: 0.3% (Expected: 0.4%)
Sep Unemployment Rate: 4.2% (Expected: 4.2%)
Sep Non-Farm Payrolls: 150K (Expected: 142K)
Bottom Line:
The SPY, QQQ, IWM, and DIA have all triggered buy signals, with no indications of a market top or imminent reversal. Our next key pivot date is anticipated on October 8th, and our outlook for the year-end remains bullish. Cash on the sidelines continues to build, with total money market balances surging to $6.4 trillion last week, marking a near-record increase of $130 billion. As the Federal Reserve transitions into an easing cycle and China rolls out stimulus measures, investor sentiment is shifting beyond inflationary concerns. In addition, market participants are closely watching the U.S. election outcome, though we believe either candidate will likely be favorable for markets in the short term. October is expected to be a volatile month, which is typical due to seasonal factors. However, we expect equity markets to trend higher once we pass the U.S. election and head into December. The VIX is likely to settle in the 10-11 range, signaling reduced implied volatility during the holiday season.
