Stock Market Update Tuesday October 15, 2024

Stock Market Update Tuesday October 15, 2024 Stocks retreated from record highs today, as key indices experienced a pullback across sectors. The S&P 500 dropped 0.76%, while the Nasdaq shed 1.01%, driven largely by weakness in the tech sector. Notably, chipmakers took a significant hit, with the semiconductor ETF (SMH) falling 5%. Heavyweights like Nvidia, AMD, and ASML faced notable declines, contributing to the sector's underperformance. In contrast, the Russell 2000 gained 0.29%, signaling some strength in smaller-cap equities.

Pressure in the healthcare and semiconductor sectors weighed heavily on markets today as well, while real estate and consumer staples emerged as the day's top performers, offering some shelter in an otherwise risk-off session. The three major indices remain positive for the month, maintaining upward momentum despite historically volatile seasonal trends. Investors are now closely watching third-quarter earnings.

Away From Stocks: Treasury's found renewed demand on the long end, with the 30-year yield falling seven basis points to 4.32%. In commodities, WTI crude was hammered, dropping 4% to settle near $71 a barrel, while gold gained, reaching $2,661 per ounce. Bitcoin surged to $66,800, and the VIX, a gauge of market volatility, rose just under a point to 20.7.

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Markets are demonstrating remarkable resilience, defying the typical seasonal weakness that is historically expected during this period. Despite hotter-than-expected inflation data, with September's CPI coming in elevated, and a softening labor market, equities continue to push higher. This strength can be attributed to an influx of liquidity, which is providing support to risk assets in the near term. While macroeconomic fundamentals, such as inflation and employment data, remain critical to the longer-term outlook, the immediate focus appears to be driven by Jerome Powell &Co. they seem content allowing the markets to climb higher in the short term, as liquidity conditions remain favorable, despite broader macro concerns.

FOMC Minutes:

On October 9, 2024, the Federal Reserve released the minutes from their September 17-18 FOMC meeting. The minutes, which take approximately three weeks to prepare, revealed substantial support among committee members for a modest 25bps rate cut as they assessed the evolving economic conditions. However, Chair Jerome Powell successfully convinced all but one member to back a more aggressive 50bps cut, demonstrating his leadership in guiding monetary policy decisions.

Given the mixed economic data released since the meeting, including both stronger and weaker-than-expected indicators, there may be increased momentum among policymakers advocating for a smaller rate cut at the upcoming meeting. This shift in sentiment could shape the debate as the Fed prepares for its next rate-setting meeting scheduled for November 5-6, with the announcement and Chair Powell's press conference on November 6, coinciding with the day after the U.S. election. For those interested in reviewing the minutes released last week, you can access them directly via the [Federal Reserve’s website](https://www.federalreserve.gov).

Bottom Line:

The SPY ETF, QQQ ETF, IWM ETF, and DIA have all activated bullish buy signals, with no signs of a market top or imminent reversal. Our year-end outlook remains optimistic, supported by our proprietary algorithm and favorable liquidity conditions. Cash on the sidelines continues to accumulate, creating potential for a strong inflow into equities. Jerome Powell & Co. maintain a dovish stance, reflecting a 'no landing' economic scenario, while China's PBOC has introduced significant monetary easing, adding further global stimulus.

Market participants are closely monitoring the upcoming U.S. election results, but we anticipate a favorable market reaction regardless of the outcome, as either candidate is expected to support short-term growth. October's volatility aligns with historical seasonal patterns, yet we believe markets will resume an upward trajectory following the election, paving the way for a strong December rally. The VIX is projected to settle in the 10-11 range, indicating a reduction in implied volatility as we approach the holiday season, which typically supports a risk-on sentiment in equity markets.