The Week That Was, The Week Ahead: Macro & Markets, September 9, 2024

Everything to Know about Macro and Markets

Stocks ended the short, brutal week with widespread losses. The S&P 500 (SPX) tumbled 4.25%, marking its worst week since the regional banking crisis in March 2023. The Dow Jones Industrial Average (DJIA) fell by 2.93%. Meanwhile, the tech benchmarks Nasdaq Composite (NDAQ) and Nasdaq-100 (NDX) lost 5.77% and 5.89%, respectively, with the latter registering its worst week since 2022.

Tech Weighs on the Markets

The large declines in stocks in the first week of September confirm the historical pattern, as statistically this month has been the worst month of the year for stock-market returns. Stretched valuations and heavy positioning in many pockets of the market are contributing to the sell-off. Risk-off sentiment now appears widespread, with the “sector rotation” trend apparently on hold, as reflected in the large weekly declines of value-stock ETFs. After the data showed that U.S. manufacturing deteriorated for the fifth straight month and the job market continued to soften, investors succumbed to fears of weak economic growth.

The S&P 500 fell every day of the shortened trading week, pulled down by its largest and strongest component, tech. The S&P 500 Information Technology sector, representing over 31% of the index’s weight, dropped more than 6% in the past week. The worst-performing industry in the S&P 500 was the Semiconductor & Semiconductor Equipment with a tumble of 11.26%. While the main U.S. benchmark index is less than 5% off its record high, the large-cap tech NDX is back in correction territory with a drop of almost 11% from the record high.

A Rate Cut Not Too Clear Cut

Last week was all about the deteriorating job market. The JOLTS data showed July’s job openings fell to their lowest since the start of 2021; the ADP data reflected the slowest pace of private job growth, also since 2021; and Friday’s report showed that payrolls rose at a much slower rate than was anticipated, although increasing from a sharply revised July figure.

The apparent cooling of the labor market was the main source of anxiety in the markets. There was a sharp increase in speculations that the Fed could be behind the curve as it performs its widely anticipated policy easing this month, with many calling for a 0.5% cut.   

On the other hand, different parts of the jobs report reflected continued strength, keeping hope for a soft landing almost intact. Thus, the unemployment rate ticked down to 4.2% from July’s 4.3%. In addition, average weekly hours rose as was expected, while average wages increased above expectations.

The multiple revisions the job-market data underwent recently were enough to frustrate market participants, muddying the economic picture and making comparisons futile. However, on the whole, the latest report confirmed a softening job market, which supports rate cut expectations, but not enough to strongly imply a 50bps rate reduction.

On the other hand, the Federal Reserve rate committee doesn’t meet in October, leaving a large gap between the September and November meetings. This does not leave sufficient time for the Fed to respond if there is a further deterioration in labor conditions. Thus, the policymakers face a tough decision: whether to reduce rates by 0.25% and risk a stalling job market and a recession, or by 0.50% and risk rekindling inflation.

Stocks That Made the News

¤ Nvidia’s (NVDA) saw its market cap drop by a staggering $406 billion, the largest weekly drop for any U.S. company in history. NVDA shares lost almost 14% for the week, pressed by broad market negativity and the chip sector’s weakness.

¤ Broadcom Inc. (AVGO) posted better-than-expected quarterly results, but the beat was smaller than in previous quarters. In addition, the chipmaker’s total current-quarter revenue guidance disappointed, despite an increased outlook for AI-related revenue. AVGO slumped 12.7% for the week. The tech behemoth’s slide and Nvidia’s drop heavily weighed on semiconductor stocks, pulling down shares of Advanced Micro Devices (AMD), Micron (MU), and others.  

¤ Dell (DELL) shares fell through the week along with other chipmakers but rebounded strongly after hours as the S&P Dow Jones Indices announced Friday evening that the stock would be added to the S&P 500 index on September 23^rd.

¤ Super Micro Computer (SMCI) added to its previous declines, falling almost 7% over the week, after JPMorgan analysts downgraded the stock to “Hold” and cut its price target, citing challenges to near-term sentiment and the possibility that the company would have to cut prices to enhance competitiveness.

¤ Real Estate, Utilities, and Consumer Staples sectors bucked the market’s downward trend, locking in weekly gains. The former was spurred on by investor hopes for significant interest-rate declines in the next year, while the latter two attracted haven-seekers amid the market turbulence. The maker of Oreo and other snacks, Mondelez International (MDLZ), was the S&P 500’s best performer with a weekly jump of 6.47%, followed by a real-estate investment trust American Tower (AMT), which gained 5.66%. 

Upcoming Earnings and Dividend Announcements

The Q2 2024 earnings season has ended, but several newsworthy earnings releases are still scheduled for this week. These are the releases of Oracle (ORCL), Adobe (ADBE), and Kroger Company (KR).   

Ex-dividend dates are coming this week for BlackRock (BLK), FedEx (FDX), Elevance Health (ELV), Occidental Petroleum (OXY), HP (HPQ), Ameren (AEE), Ameren (AEE), Coca-Cola (KO), Chubb (CB), Gilead Sciences (GILD), and other dividend-paying firms.  

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