Market Update – October 7th, 2024

Author:  Joe Maas, CIO SPG Advisors LLC

Monday, October 7th, 2024

Financial Markets

Stocks started the week on a negative note, impacted by news of heightened tensions in the Middle East and union strikes along east coast ports, but later regained some ground on Friday following a robust jobs report and port strike resolution. As of Friday, October 4th, the Dow Jones Industrial Average rose 0.05%, while the S&P 500 and Nasdaq Composite declined by -0.20% and -0.28%, respectively. Bonds also experienced a decline, with the Barclays Aggregate Bond Index falling -1.29%.

Source: Zacks

Market News

September Jobs. The September jobs report released on Friday surprised markets with stronger-than-expected results across the board. The unemployment rate dropped to 4.1%, below expectations of 4.2%, and nonfarm payroll gains jumped to +254,000, significantly above estimates of 145,000.

Sectors experiencing the largest monthly job gains included leisure and hospitality (+78,000), health care and social assistance (+71,700), government (+31,000), construction (+25,000), and professional and business services (+17,000). However, there were declines in manufacturing (-7,000) and transportation and warehousing (-8,600).

Finally, average hourly earnings rose by 0.4% in September and were up 4% compared to a year ago, outpacing inflation. Overall, September’s better than expected jobs data supports the view that the Federal Reserve may be able to cut interest rates just enough to keep the economy on a stable footing.

Source: Bureau of Labor Statistics

August JOLTS. August’s Job Openings and Labor Turnover Survey (JOLTS) data released last week showed that the U.S. labor market remained resilient, with job openings surpassing expectations. The report indicated that the number of available positions rose to over 8 million, an increase of 329,000 from July and well above the consensus estimate of 7.7 million.

Additionally, the quit rate declined to 1.9%, the lowest level since June 2020. This suggests that while new opportunities are emerging, workers feel less inclined to leave their current positions, signaling stability and reduced job-hopping within the labor market.

Source: Bureau of Labor Statistics

ISM Manufacturing. Manufacturing continues to be a weak link of the US economy, as the September ISM Manufacturing Index remained unchanged at 47.2%. This marks a continued contraction, as readings below 50% indicate a decline in activity.

Demand stayed soft, output fell, and inputs remained accommodative in September, reflecting ongoing challenges for the sector. Thirteen out of eighteen industries reported contraction, while five showed growth: Petroleum & Coal Products, Food, Beverage & Tobacco Products, Textile Mills, Furniture & Related Products, and Miscellaneous Manufacturing.

Many companies cited a reluctance to invest in capital and inventory due to restrictive monetary policy and uncertainty around the upcoming election. It will be worth watching how business sentiment evolves, as greater election clarity and a more accommodative Federal Reserve could provide a much-needed boost to the manufacturing sector.

Source: Institute for Supply Management

ISM Services. September’s ISM Services Index demonstrated continued strength in the service sector of the economy, rising to 54.9%, the highest reading since February 2023, and indicating expansion for the 49th time in the past 52 months. This expansion was driven by higher new orders and increased business activity.

In contrast to the ISM Manufacturing Index, only five out of seventeen industries experienced contraction, including Other Services, Agriculture, Forestry, Fishing & Hunting, Wholesale Trade, Professional, Scientific & Technical Services, and Retail Trade. Overall, the services sector remains the primary driver of economic growth in the U.S. and this month’s ISM Services Index reinforced this.

Port Strike Resolves. The union port strikes along the East Coast, which began at midnight on Monday, September 30th, came to an end on Friday morning after both parties reached an agreement on the primary issue—the scale of wage increases. Although logistics experts had warned that it could take three to five days to recover from each day the ports were shut down, the three-day strike caused minimal disruption. This was largely because many shippers had proactively moved their goods through the ports ahead of the strike, given the well-known midnight on Monday night deadline. The current contract has been extended until January 15th as both sides work through the remaining details, so the story isn’t over yet—but for now, the U.S. seems to have avoided a supply chain nightmare.

Summary

Stocks ended the week slightly lower but still near all-time highs, as the September jobs report surprised markets with stronger-than-expected results. The unemployment rate fell to 4.1% in September and nonfarm payroll gains jumped to 254,000, both better than expectations. Meanwhile, August’s JOLTS data showed job openings remained higher than expected despite signs of broader labor market normalization. The ISM Manufacturing Index demonstrated continued weakness in the manufacturing sector, while on the other hand, the service sector continued to display strength in September.

We appreciate your continued trust.

Thank you,

Joseph M. Maas,
CFA, CFP®, ChFC, CLU®, MSFS, CCIM, CVA, ABAR, CM&AA

The information contained herein is general in nature. It does not take into account your particular investment objectives, financial situation, or needs. It is provided for illustrative or informational purposes only, and should not be construed as advice. Our advisors can meet with you to discuss your retirement plan.

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