The Week That Was, The Week Ahead: Macro & Markets, October 6, 2024

Everything to Know about Macro and Markets

Stocks soared following the blockbuster September jobs report, with the strong Friday rally helping indexes reverse previous losses and notch their fourth consecutive week of gains. The S&P 500 (SPX) gained 0.22% for the week, and the Dow Jones Industrial Average (DJIA) inched up by 0.09%. Meanwhile, the tech benchmarks Nasdaq Composite (NDAQ) and Nasdaq-100 (NDX) were up by 0.10% and 0.13%, respectively.

Strikes, Missiles, and Elections

After locking in their best September in over a decade, U.S. stocks began the fourth quarter on a sour note. In addition to political uncertainty ahead of the upcoming November elections and the worries about the economy’s health, markets received additional reasons for concern. The East Coast port strike threatened to harm economic activity, Hurricane Helene wreaked havoc in the southwest United States, and escalating Middle East hostilities added to economic and geopolitical uncertainty.     

A significant flare-up in Middle East tensions strongly dented investor sentiment. Oil prices skyrocketed following Iran’s missile barrage on Israel, And the world is waiting for Israel’s expected response. While the scope and direction of Israel’s retaliation measures are still unknown, the possibility of targeting Iran’s oil facilities continues to act as a dragon market sentiment.    

With less than a month before the elections, the tight race will continue to keep investors on edge. Historically, market volatility tends to increase in the weeks ahead of elections, with stocks usually dropping right before the crucial day. However, history also tells us that stocks have a tendency to stage a strong recovery after Election Day regardless of the winner, celebrating the decrease in levels of uncertainty.  

While the port strike was resolved quickly, taking the threat of an adverse impact on supply chains off the table, concerns about politics and geopolitics remain a risk to the risk sentiment. However, the latest jobs data at least relieved some stress about the economy.

Good News is Good Again

After the Federal Reserve’s jumbo cut in September, market participants debated the size of the next interest-rate reduction, with traders seeing even chances between a 0.25% and a 0.50% cut . However, odds of another jumbo cut tumbled to near zero after data showed that the U.S. economy added 254,000 jobs in September, the most in six months and almost twice the expected new payroll amount. In addition to the blockbuster headline, labor data was better than expected across the board, with the unemployment rate falling to 4.1% and wages rising more than was projected. Moreover, July and August job growth numbers were upwardly revised, as was August wage growth.

These numbers not only underscore the continued resilience of the job market but increase the odds that the economy will continue to grow above trend in the current quarter. Although the jobs data diminished hopes for a larger interest-rate reduction, the numbers lifted risk sentiment that had been under pressure beforehand. Investors view a strong economy as better for the stock markets, as larger cuts would signify economic weakening.   

Stocks That Made the News

¤ The Energy sector had its best week in nearly two years, rising 7% and breaking a six-month downtrend. The second best performer among the S&P 500 sectors last week, Communication Services, rose by 2.2%. Real Estate was the worst performer last week, falling by 1.9%, followed by Consumer Staples with a 1.6% decline.

¤ OpenAI, the creator of ChatGPT, closed its latest funding round with a valuation of $157 billion – roughly the same as Goldman Sachs (GS) and more than any private company in the U.S. In fact, the world’s hottest AI startup is now worth more than 87% of S&P 500 companies. Besides OpenAI itself, one of the biggest winners of its financial success is Microsoft (MSFT), which holds a significant stake in the company, having invested nearly $13 billion.   

¤ Nvidia (NVDA) finished the week with gains of over 4.4% after CEO Jensen Huang announced that Blackwell, its latest AI chip is now in full production and meeting enormous demand after having previously encountered production delays.

¤ Tesla (TSLA) stock fell by 4.7% on the week after the EV manufacturer reported disappointing third-quarter deliveries and recalled over 27K Cybertrucks due to problems with rear view images.

¤ Humana (HUM) was by far the worst performer among the S&P 500 stocks last week. The healthcare providers’ shares tumbled by almost 25% after it warned about a prospective hit to revenue from a sharp drop in membership in its higher-rated (four stars and above) plans.   

¤ Nike (NKE) dropped by almost 8% on the week after the sports footwear maker reported a decline in quarterly revenue and withdrew its full-year guidance. 

Upcoming Earnings and Dividend Announcements

The Q3 earnings season officially begins this Friday with a slate of large bank reports. Several newsworthy earnings releases are scheduled for this week, coming mostly from companies whose fiscal years differ from the calendar one.   

The reporting companies this week are PepsiCo (PEP), Delta Air Lines (DAL), Domino’s Pizza (DPZ), Progressive (PGR), JPMorgan Chase & Co. (JPM), Wells Fargo (WFC), BlackRock (BLK), Bank of New York Mellon (BK), and Fastenal Company (FAST).

Ex-dividend dates are coming this week for McCormick & Company (MKC), Edison International (EIX), Dollar General (DG), American Tower (AMT), AT&T (T), Verizon (VZ), General Mills (GIS), and other dividend-paying firms.    

For additional exclusive market insights and content from TipRanks Macro & Markets research analyst Yulia Vaiman, click here.