 | AUTHOR: Jason Roque, CFP®, APMA®, AWMA® TITLE: Investment Adviser Rep – CCO TAGS: S&P 500, NASDAQ |
With September in the rearview mirror, markets turned a profit in the first week of October. What lies ahead?
Monday S&P 500 0.01% | NASDAQ 0.67%
Manufacturing data showed signs of life, as they improved slightly. This, however, was not the focus as interest rates and what the Federal Reserve Bank (FRB) may do next garnered all the attention. Utilities fell on the prospect of higher for longer rates.
Tuesday S&P 500 1.37% | NASDAQ 1.87%
Job openings rose to 9.61M (Aug) from 8.8M. When the economy is experiencing low inflation, this data would be heralded for economic strength. That is not the case currently. Strong job data means the FRB will feel confidence in raising rates further, which does further damage to the economy.
Wednesday S&P 500 0.81% | NASDAQ 1.35%
More job data out Wednesday gave hope that more damage had been done to the job market than originally thought. That sounds weird, but a weaker jobs report might hold the FRB at bay from a rate hike (not likely).
Thursday S&P 500 0.13% | NASDAQ 0.12%
Jobs are dominating the headlines this week, while the underlying implication for the FRB is translating into equity moves. Initial jobless claims came in light for the week, spurring confidence in a stronger than expected jobs report. The move, again, could signal more rate hikes ahead.
Friday S&P 500 1.18% | NASDAQ 1.60%
Happy Jobs Friday! The market’s initial reaction to the jobs report was “oh crap” as nonfarm payrolls rose by 336K when 170K was expected. That quickly turned to a buy mentality. As investors dug further into the report, wage growth (an indication of future inflation) rose by 4.2%. The lower reading gave hope that the FRB’s efforts towards quelling inflation may be working. Regardless, expectations for a November rate hike are high.
Conclusion S&P 500 0.48% | NASDAQ 1.60%
Markets returned to weekly profits during the first week of October. Jobs data dominated headlines throughout the week. The implications are clear: A weaker job market could mean weaker rates ahead and a stronger jobs market could embolden the FRB to hike rates further than they should. The FRB has been transparent about the hiking cycle. Regardless of the hike in November, we are likely reaching the end of the hiking phase of this expansion. The next question will be, when will the first rate cut occur, and was it too late to avert a recession?
Now that September is over, we can look eagerly to the third quarter earnings reports which begin this week. GDP growth in the third quarter was expected to be fairly robust. As a result, earnings should provide a decent jump start to the fourth quarter.
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