Last Week on Wall Street – November 2nd, 2024

S&P 500: -1.37% DOW: -0.15% NASDAQ: -1.51% 10-YR Yield: 4.39%

What Happened?

Stocks rallied on Friday to kick off November, led by a strong performance in major tech stocks like Amazon and Intel, which boosted investor sentiment despite a weaker-than-expected October jobs report. Amazon surged 6.2% due to strength in its cloud and advertising sectors, while Intel rose 7.8% after reporting earnings above analyst expectations. The Dow Jones Industrial Average gained 0.69%, the S&P 500 rose 0.41%, and the Nasdaq climbed 0.8% on Friday as traders seemed unfazed by disappointing jobs data, attributing the low job growth to temporary factors such as hurricanes and the Boeing strike.

The week saw mostly negative performance, with only Financials (+0.02%) and Communication Services (+1.73%) finishing in positive territory. Real Estate (-3.01%) and Utilities (-2.8%) led the losses. Notably, the jobs report showed only 12,000 new jobs added, marking the slowest job growth since December 2020, but the unemployment rate remained steady at 4.1%. Investors are also eyeing the upcoming U.S. presidential election and the Federal Reserve’s policy meeting next week, where a 25-basis-point rate cut is widely expected. The major indexes closed out a choppy week, with the S&P 500 and Nasdaq down 1.4% and 1.5% respectively, while the Dow ended nearly flat.

U.S. Added 12,000 Jobs in October as Storms Sidelined Workers

The U.S. economy added a seasonally adjusted 12,000 jobs in October, versus a September gain of 223,000. That wildly missed even the muted expectations of economists, who had forecast 100,000.
The Boeing strike took more people off the job. Economists generally reckoned that the bulk of October’s downdraft was temporary, and didn’t affect the larger dynamics of the market.

The key takeaway – Job growth slowed significantly in October, with the U.S. economy adding only 12,000 jobs, falling short of the expected 100,000. This sharp decline was partly due to temporary effects from hurricanes Helene and Milton, which impacted the Southeast, and the ongoing Boeing strike, which removed thousands of workers from payrolls. Despite this slowdown, the unemployment rate remained steady at 4.1%, aligning with economists’ expectations. The Labor Department noted that disruptions from extreme weather and strikes make it challenging to interpret the overall health of the labor market.

Wage growth continued, with average hourly earnings up 4% year-over-year, and consumer spending showed resilience, indicating underlying economic strength. The report comes just days before the presidential election, providing mixed signals that each campaign has seized upon. Economists suggest the broader trend reflects a gradual cooling in the labor market, which could support the Federal Reserve’s plans for a quarter-point interest rate cut next week. However, given ongoing labor market distortions from strikes and weather, future data will be key to understanding the labor market’s true state.

PCE Inflation Rate Hits 2.1% in September, Closing in on Fed Target

The personal consumption expenditures price index showed a seasonally adjusted 0.2% increase for the month, with the 12-month inflation rate at 2.1%, both in line with Dow Jones estimates.
However, the core inflation rate was at 2.7% after the measure increased 0.3% on a monthly basis.

The key takeaway – In September, inflation edged closer to the Federal Reserve’s 2% target, with the personal consumption expenditures (PCE) price index rising 0.2% monthly and 2.1% annually. Excluding food and energy, core inflation increased by 0.3% for the month and 2.7% over the year, showing persistent price pressure in services while goods prices declined. The report supports expectations for a Fed rate cut next week, following September’s unusual half-point rate reduction.

Additionally, personal income rose 0.3% and consumer spending increased 0.5%, while the personal saving rate fell to 4.6%, its lowest this year. The labor market remained steady, with initial jobless claims down to 216,000, signaling companies are retaining workers. The employment cost index showed a 0.8% rise in the third quarter, slightly below expectations but indicating wage growth continues.

Pending Home Sales Advanced 7.4% in September

Pending home sales in September bounced 7.4% to the highest level since March.
Compared to one month ago, pending sales climbed in all four major U.S. regions, led by the West.
Year-over-year, contract signings grew in the Northeast and West and were unchanged in the Midwest and South.

The key takeaway – Pending home sales rose 7.4% in September, reaching their highest level since March, according to the National Association of Realtors (NAR). All four major U.S. regions saw month-over-month increases, with the Northeast and West also showing year-over-year gains. NAR’s Chief Economist Lawrence Yun attributed the rise to lower mortgage rates and increased inventory, adding that further gains are likely if economic and job growth continue.

Looking ahead, Yun forecasts slower home price growth over the next two years, with existing-home sales expected to reach 4.47 million in 2025 and over 5 million in 2026. He predicts the median home price will rise to $410,700 in 2025 and $420,000 in 2026, with the 30-year fixed mortgage rate falling to 5.9% in 2025 before rising slightly to 6.1% in 2026. The next Pending Home Sales Index will be released on November 27.