Stock Market Update Wednesday October 30, 2024 Equities faced mild downward pressure this afternoon, with the S&P 500 closing 0.3% lower. The U.S. economy expanded at an annualized rate of 2.8%, driven by robust consumer spending that continues to underpin growth despite headwinds. Labor market data from ADP indicated a surge in hiring, marking the fastest pace in over a year and signaling ongoing strength in employment. Meanwhile, mortgage demand stagnated as interest rates climbed sharply, reflecting heightened borrowing costs ahead of the upcoming election and curbing refinancing and purchasing activity in the housing market.
Away From Stocks: In fixed-income markets, U.S. Treasury's displayed mixed movement: the two-year yield rose by four basis points to 4.15%, while the 30-year bond yield eased to 4.49% from Tuesday's 4.52%. Commodities saw upward momentum, as WTI crude rebounded to $69 per barrel and gold gained to $2,788 per ounce. Bitcoin remained stable, trading around $73,000, and volatility ticked higher with the VIX index closing above 20.
A sell alert was activated today in the Dow Jones Industrial Average ETF (DIA) and the S&P 500 Equal Weight ETF (RSP), indicating elevated downside risk in these indexes. At this time, we recommend against initiating or adding positions within these sectors, given current market conditions and the heightened caution advisable for equity allocations. Notably, the S&P 500 SPY ETF, QQQ ETF, and Russell 2000 IWM ETF continue to maintain buy signals. For a broader market sell-off to materialize, sell triggers across all major indices would be required, underscoring the resilience observed in select segments of the market.
Tomorrow's Macro News:
October 31st, 8:30 AM ET: Key inflation data release by the Bureau of Economic Analysis (BEA).
September PCE Price Index (m/m):
Forecast: 0.2%
Previous: 0.1%
September Core PCE Price Index (m/m):
Forecast: 0.26%
Previous: 0.13%
September PCE Price Index (y/y):
Forecast: 2.1%
Previous: 2.2%
September Core PCE Price Index (y/y):
Forecast: 2.6%
Previous: 2.678%
Q3 Employment Cost Index (ECI, QoQ):
Expected release alongside PCE data, offering insights into labor cost trends, key for gauging inflation pressures and Fed policy direction.
Bottom Line:
We have a cycle pivot date on October 29th, and traders should anticipate increased volatility leading up to this date as market participants position themselves ahead of the upcoming 2024 election. Our previous pivot date was October 8th, following which the SPY rallied for seven trading days to reach a record high on October 17th. This pattern of sideways, choppy price action is characteristic of October in an election year.
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. 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.
Election Date: Tuesday, November 5, 2024 Key state polls align with national surveys, reflecting a highly competitive race for the White House with most outcomes within statistical margins of error. Both campaigns are allocating resources strategically to the six swing states. Wisconsin, Nevada, Michigan, Pennsylvania and North Carolina. Polls indicate tight races in each jurisdiction. 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.
