Daily market snapshot

Published October 31, 2024
 Woman on couch looking at laptop

Thursday, 10/31/2024 p.m.

  • Stocks dragged lower by tech weakness – The major averages closed notably lower on Thursday, as investors digested a mix of incoming economic and earnings data – the theme of which has been "good but short of expectations." Wednesday's U.S. GDP report showed the economy grew by 2.8% last quarter, a healthy pace, but shy of the 3% mark that consensus expectations were looking for, leading to a modestly lower close for the stock market. The script was similar today, in this case with quarterly earnings results from Meta and Microsoft failing to hurdle the bar of high expectations. Bond yields were little changed on the day, with the 10-year Treasury yield just below 4.30%, up from 3.75% just one month ago. With markets primarily guided by the evolving balance between the labor market, inflation and Fed policy, it was a big day on the data calendar, with the tone being set by the release of initial jobless claims alongside the latest reading on consumer prices. The next several days will be chock full of influential events, including Friday's September payrolls report, followed by the election and the Fed interest-rate decision next week.*
  • Inflation data showing some stickiness – The release of the personal consumption expenditures deflator (a measure of consumer price inflation that the Fed prefers) showed that the month-on-month rate moved higher, driven by firmer core services prices (excluding housing). This left the annualized rate of inflation at 2.7% for the third consecutive month. There are a few ways we interpret this data. 1) The path ahead for inflation is likely to be choppier compared with the steadier pace of moderation over the last 18 months. 2) The pace of inflation is sufficiently cool that the Fed does not need to rethink its broader approach to policy easing, but it is still high enough that the Fed will need to be more measured from here, potentially taking pauses between rate cuts to assess the trend in consumer prices. And 3) The source of stickiness (services prices) is a reflection of the ongoing strength in the economy, particularly in consumer spending.  While we'll need to see further progress on core inflation, the fact that economic resilience is accompanying this next leg of disinflation is (assuming inflation does continue to moderate) a broad positive for financial markets, in our view. 
  • Employment trends remain supportive – This week includes a bevy of labor-market readings, the most important of which will come on Friday morning with the release of the nonfarm-payrolls report. The appetizer today was the read on initial jobless claims, which declined from the previous week and fell to its lowest since May. This measure of employment bounces around week to week, but the overall trend in jobless claims remains rather favorable and consistent with a labor market that is softening but not deteriorating. Markets will take their larger cues from tomorrow's payroll report, though we suspect there will be a fair bit of noise in the coming jobs data given the impact of the recent hurricanes.  Nevertheless, employment conditions continue to provide broad support to consumer spending, which will be particularly helpful heading into the holiday shopping season, as the economy looks to close out 2024 will another quarter of above-trend GDP growth.

Craig Fehr, CFA 
Investment Strategy

Source: *FactSet

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