Stock Market Update Friday October 4, 2024 The major equity indices posted solid gains, with the S&P 500 rising 0.9%, the Nasdaq Composite advancing 1.22%, and the Russell 2000 increasing 1.41%. Today's rally propelled the markets into positive territory for the week, following a rough start to October.
Away From Stocks: Treasuries experienced significant selling pressure as the yield on the 30-year bond increased eight basis points to 4.26%, while the two-year note yield vaulted to 3.93% from 3.70% on Thursday. WTI crude oil continued its upward trajectory, advancing toward $75 per barrel. Gold prices remained relatively unchanged, closing at $2,651 per ounce. Bitcoin extended its gains, rallying to $62,300, and the CBOE Volatility Index (VIX) settled just below 19.
Check out our premium content below. Free subscribers can see what they're missing. Also, listen to our new podcast developed by NotebookLM by Google AI.
The September non-farm payrolls report significantly outperformed expectations, posting a headline figure of +254,000 versus the consensus estimate of +150,000. This substantial beat was primarily driven by robust job gains in the restaurant sector (+69,000), and there was also incremental improvement in average hourly earnings. Additionally, the unemployment rate exceeded expectations by declining to 4.1%. Today's economic data reaffirms that positive developments continue to bolster equity markets, underscoring the robustness of the U.S. economy and the sustained bull market.
Over the past 24 hours, we've witnessed a consistent influx of favorable economic indicators. The stellar jobs report, coupled with the declining unemployment rate, enhances the bullish outlook. Another encouraging development is the postponement of the port strike until after the elections, which mitigates near-term economic risks and supports our view that the strike was merely "short-term noise." This outcome is advantageous for equities in the near term.
Furthermore, the Federal Reserve has adopted a more dovish monetary policy stance, which is supportive of continued economic expansion and equity markets. The central bank's cautious approach to future interest rate hikes provides additional confidence to investors, signaling that monetary policy will remain accommodative.
United Airlines was among the day's top-performing stocks, surging 6%.
Tesla, AMD, Meta, and Amazon also outperformed, contributing to the Nasdaq Composite's upward momentum. The Financials sector was the top performer, as big bank earnings are set to kick off next Friday with JPMorgan Chase and Wells Fargo scheduled to report.
In addition, China has initiated significant fiscal stimulus measures—often referred to as deploying a "bazooka"—aimed at invigorating its economy. This move is expected to have positive global spillover effects, particularly benefiting emerging markets and international trade partners.
Economic data across the board demonstrated strength, with employment figures, unemployment rates, and wage growth all surpassing forecasts. In response, the yield curve flattened as market participants began pricing out imminent rate cuts, leading to a spike in short-term Treasury yields and a strengthening of the U.S. dollar. In the federal funds futures market, the implied probability of a November rate cut has significantly diminished to just 25 basis points, and expectations for a December cut have been halved to 50 basis points compared to levels from a few weeks ago.
We anticipate that the cash sitting on the sidelines will be deployed post-election, injecting liquidity into the markets and potentially driving equities even higher. Investors are waiting until the uncertainty in the political landscape is over, leading to increased market participation and risk appetite.
Bottom Line:
The SPY, QQQ, IWM, and DIA have all triggered buy signals, with no indications of a market top or imminent reversal. Our next key pivot date is anticipated on October 8th, and our outlook for the year-end remains bullish. Cash on the sidelines continues to build, with total money market balances surging to $6.4 trillion last week, marking a near-record increase of $130 billion. As the Federal Reserve transitions into an easing cycle and China rolls out stimulus measures, investor sentiment is shifting beyond inflationary concerns. In addition, market participants are closely watching the U.S. election outcome, though we believe either candidate will likely be favorable for markets in the short term. October is expected to be a volatile month, which is typical due to seasonal factors. However, we expect equity markets to trend higher once we pass the U.S. election and head into December. The VIX is likely to settle in the 10-11 range, signaling reduced implied volatility during the holiday season.
