Market Synopsis: Stocks Mixed, Treasury Yields Higher, Commodities Lower, Dollar Higher, Crypto Higher
Past Week Events:
This Week's Events:
September's Private Payrolls Miss Expectations In September, private payrolls saw an addition of only 89,000 jobs, falling short of the anticipated 160,000, according to ADP. This is a significant drop from August's revised 180,000. The services sector, especially leisure and hospitality, contributed the most to the job gains. However, these were offset by job losses in areas like professional and business services and manufacturing. The slowdown in job growth sent treasury yields lower.
U.S. Job Market Strengthens in September
The U.S. Economy introduced 336,000 jobs in September, surpassing expectations. President Biden credited the increase to his “Bideneconomics”, emphasizing the rise in manufacturing employment. However, the labor pressure participation rate for girls aged twenty five to fifty-four saw a mild decline. The restaurant industry's employment surpassed pre-pandemic levels, with a focus on pickup and delivery options. Despite the positive job data, JPMorgan's chief U.S. economist anticipates the Federal Reserve might pause interest rate hikes in November.
Next Week:
CPI, Consumer Price Index, will be released next week. CPI is a key indicator of inflation, as it measures the change in prices of a certain basket of goods and services. As CPI has been on the decline, inflationary pressures have been slowly alleviating and optimism for future rate cuts increase. Analysts predict it to continue to drop, with the year-over-year forecast dropping from 3.7% last report to 3.6% this report, and the core CPI year-over-year droppiung from 4.3% to 4.1%. Good inflation data will make the market happy.
The PPI, which is closely related to the CPI, will also be released this week. Consumer pricing changes are tracked by the CPI, whereas producer price changes are tracked by the PPI. PPI, similar to CPI, is forecasted to drop. With the monthly PPI dropping from 0.7% last month to a 0.3% forecast this upcoming report. Both of these economic indicators are quite important and will be eagerly awaited.
Market Snapshot:
This week, the financial markets grappled with conflicting jobs data. The jobs report presented a mixed bag, showcasing stalling wage growth, an uptick in job gains, but also revealing underlying concerns beneath the headline figures. Financial conditions tightened considerably this week, reaching some of the tightest levels seen in this cycle. Rate-change expectations for the week were hawkish, with 2023's curve indicating slightly higher chances of more hikes, while 2024's curve remained relatively flat.
In the stock market, a significant buy imbalance in the morning, combined with short covering, propelled US stocks. This momentum was particularly evident around mid-day. By week's end, the Nasdaq and the S&P 500 emerged as the winners, with the former posting significant gains. The Dow, however, ended slightly in the red, and the Russell fell by about 2%. Sector-wise, Tech and Healthcare dominated, while Energy lagged behind.
The dollar concluded the week on a positive note, despite some volatility. In the cryptocurrency realm, Bitcoin managed to end the week on a positive note, hovering above the $28,000 mark. Gold, on the other hand, faced a decline over the week, even with a slight bounce on Friday. The energy sector had a challenging week, with WTI crude oil prices dropping to six-week lows.
Quip of the Week:"It is better to be early than too late in recognizing the passing of one era, the waning of old investment favorites and the advent of a new era affording new opportunities for the investor" - T. Rowe Price
U.S Equities:
Indexes(Week)
SPX 4,308.50(0.48%), DJIA 33,407.58(-0.30%),
NASDAQ 13,431.34(1.60%), RUT 1,745.56(-2.22%)
Sectors:
This week the market saw a variety of performances, with technology ending over 2.5% up and energy ending over 5% down. The reasons for these performances can be attributed to global economic conditions and individual stocks within the sectors. Energy, particularly oil, has seen extreme pressure in the last few weeks because of OPEC production cuts, but recently Saudi Arabia stated they will increase their production output and send prices lower, which hurt oil. Exxon Mobil, a large oil company, ended -8.85% down this week, also hurting the energy sector. Technology saw a great week; despite positive jobs data, overall inflationary pressures are alleviating and the market is becoming more opitimstic, which is good for technology. Individual stocks within technology performed well also attributing to this success.
Treasuries:
The bond market faced turbulence, with bonds taking a hit throughout the week, especially the long end. However, Friday's market dynamics offered some respite, slightly improving the outlook for bonds. The Friday Jobs data which showed a very strong labor market pushed rate expectations in a hawkish direction. Yields experienced a sharp spike following the payroll report, before retreating.
Commodities:
Oil
Gas Prices Expected to Drop by Halloween U.S. oil prices have seen a significant drop of 5.6% to $84.22 per barrel, marking its largest decline in a year. This comes after prices neared $95 a barrel last week. The national average for regular gas has decreased to $3.77 a gallon, with predictions of it dropping to around $3.25 a gallon by Halloween. This decline is attributed to a sudden surge in gasoline inventories and market speculations. However, experts warn of potential price rebounds by next spring due to increasing demand and refinery challenges.
Gold
Gold saw a poor week amidst positive job data. Positive job data was not a good sign for gold, as positive job data generally anticpiates rate hikes and Gold performs well in a low interest rate environment. Gold bounced back on Friday, but it still ended the week negative.
Crypto:
BTC -27.962, 1.67% ETH - 1,639, -1.41%
BTC Graph (5-day)
Bitcoin saw a week full of ups and downs, as U.S payroll data pointed towards high intest rates for longer than some may have previously expected. They are able to bounce back from this, ending around the 28,000 resistance line that has proved to be quite strong. This week is a cog in the wheel looking in the bigger picture: when can bitcoin break that strong 30,000 resistance line?
Europe:
Stoxx 600- 444.93, -1.18% DAX- 15,229, -1.02% FTSE 100 -7,494, -1.49%
DAX Chart (5-day)
All European indexes ended negative this past week, as U.S job data proved interest rates may remain may for months to come. The quest to eventually rate cuts seems long and arduous for many, and it seems like every other week the market sentiment is different, but many have to realize the ECB and global central banks alike will not stop until they reach their inflation targets.
Asia:
XJO (Australia)-6,954, -1.34% Shanghai 180 Index-7,991, 0.43% Nikkei 225- 30,994, -2.71%
XJO Chart (5-day)
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