Market Commentary
Weekly Market Commentary Oct 21-25, 2024
By: Greg Lai and Alex Hsaio, Co-Chief Investment Officers
With just 15 days until the 2024 presidential elections, market activity continues to center on economic fundamentals rather than the political narrative. Following the Fed’s September 18th FOMC meeting, which cut the policy interest rate by 50 basis points, the stock market has seen five consecutive weeks of gains. The S&P 500 closed the week up 0.87%, bringing its year-to-date advance to an impressive 24.33%, narrowly edging out the Nasdaq Composite.
Financial stocks were a standout, with the sector posting a weekly gain of 2.63%. Heavyweights like Goldman Sachs, Morgan Stanley, Charles Schwab, and Travelers beat “consensus” earnings estimates by 23%, 20%, 2.7%, and 38%, respectively, driving bullish sentiment. However, the real star of the week—and the year—was the utilities sector, particularly clean energy stocks. Riding the wave of the electrification boom, fueled by advancements in AI and electric vehicles, utilities posted a 3.28% gain for the week, extending their YTD surge to 33.55%. This rally highlights how certain sectors align with structural shifts in the economy and Fed policy, positioning themselves as long-term beneficiaries of transformative technologies.
Bond yields swung amid a week of mixed economic signals but ultimately ended flat, with the Bloomberg U.S. Aggregate Index eking out a gain of 0.05%. Retail sales exceeded expectations, rising 0.4% MoM. However, the optimism was tempered by a sharper-than-expected 0.3% decline in U.S. industrial output, down 0.64% year-over-year. Capacity utilization has been trending lower, dropping to 77.5% in September, further reflecting the slowdown in production. Retail inventories, excluding autos, ticked up 0.5%, suggesting that consumer demand might be cooling as businesses adjust to a softer spending environment. While some of these economic stumbles could be attributed to disruptions from recent hurricanes and strikes involving U.S. dockworkers and Boeing, it’s too soon to say whether these are temporary setbacks or signs of broader economic weakness.
The coming weeks will see the market’s attention shift from financials to a fresh round of quarterly earnings, with industrial giants and consumer staples taking center stage. Heavyweights like Nucor, GE Aerospace, Verizon, Tesla, Coca-Cola, IBM, Amazon, and UPS are set to unveil their results, giving investors a clearer picture of the economy.
The outlook for the ensuing weeks will continue to focus on quarterly earnings led by industrials and consumers away from financials stocks led by Nucor, GE Aerospace, Verizon, Tesla, Coca-Cola, IBM, Amazon, and UPS. Sowell will pay particular attention to the economic sentiment leading up to the next FOMC meeting on November 7, two days after the elections, weighing the trade-offs between growth, inflation, and interest rates as the year winds down.
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This material represents an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Past performance does not guarantee future results.
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The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is a market value weighted index with each stock’s weight in the index proportionate to its market value.
The Dow Jones Industrial Average (DJIA) is a price-weighted average of 30 actively traded “blue chip” stocks, primarily industrials, but includes financials and other service-oriented companies. The components, which change from time to time, represent between 15% and 20% of the market value of NYSE stocks.
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Advisory services offered through Sowell Management, a Registered Investment Advisor.
