Investment Update November 11, 2024

Last Week on Wall Street

Economic data for the week included U.S. GDP growth showing another strong quarter, as did personal income and spending. Manufacturing data continued to contract, as has been the trend over the past several years. The monthly employment situation report was far weaker than prior months, below lower expectations, partially due to the impacts of hurricanes and a major labor strike.

Equities fell back last week with mixed company earnings call commentary and higher interest rates. Bonds fell back as yields continued to move higher, with concerns over fiscal spending. Commodities fell back as geopolitical concerns related to the Middle East faded a bit.

U.S. stocks fell back as a whole last week, with notable weakness in large cap growth offset by lesser declines in value and minimal change in small cap stocks. By sector, communications gained over 1% to lead, while technology, utilities, and energy all lost several percent for the week. Real estate also fell by -3% along with higher long-term interest rates. On Thursday, markets took a downward turn after quarterly reports from Microsoft and Facebook especially. Despite decent Q3 numbers, this appeared to be due to continued concern over high levels of artificial intelligence infrastructure spending, and an uncertain timeline for this capital expenditures to translate into sales. Sentiment on Friday improved dramatically as a weak jobs report (albeit weather- and strike-driven) provided more hope again for keeping Fed rate cuts on track.

In the S&P 500 index, it was a busy week for earnings with nearly half of member firms reporting last week. Per FactSet, 70% of the index has now reported, with three-quarters seeing a positive earnings surprise and 60% a positive revenue surprise. The blended year-over-year growth rate current falls at 5.1%, which would represent five straight quarters of growth, but only about half the pace of the especially-strong double-digit Q2-2024 reading.

Foreign stocks fared similarly to U.S. equities, with negative returns, aside from Japan, which gained. European growth improved, which tended to lower expectations for a more European Central Bank rate cuts looking ahead. In the U.K., yields rose as a new budget was announced. Japanese stocks rose sharply on Monday, as the ruling party failed to secure a majority of seats in the House of Representatives. Emerging markets were less China-driven for a change, with declines in Brazil and Mexico related to weaker commodities and trade policy uncertainty surrounding the U.S. election. In South Korea and Taiwan, declines were tied to poor returns for U.S. tech stocks, to which those markets tend to be correlated.

Bonds lost ground as interest rates continued to tick higher during the week, along with concerns over sticky inflation and loose post-election fiscal spending. Floating rate bank loans and high yield outperformed traditional bonds with minimal declines. Foreign bonds were also weak, due to a stronger U.S. dollar.

Commodities lost ground for the week, led downward by energy and industrial metals, while agriculture was little changed. Crude oil prices fell over -3% last week to $69/barrel, which mostly occurred early in the week as Israeli strikes on Iran were generally insignificant, with the likely intent of de-escalation.

Fact of the Week

The median weekly earnings in Q3 2024 were $946 for workers with a high school diploma and $1,533 for workers with a bachelor’s degree. These earnings are for full-time positions (source: U.S. Bureau of Labor Statistics).