Market Commentary
Equity trading was relatively quiet on Monday as the S&P 500 finished higher following three consecutive weeks of gains.
Investors are now focused on Friday’s U.S. Jobs Report, which will provide a temperature check on the economy and guide expectations for Federal Reserve rate moves. Markets have already priced in another 75 basis points of cuts by the end of 2024, the trajectory of which will largely depend on inflation trends and overall economic health. Ideally, markets hope for a gradual return to neutral interest rate levels, minimizing the policy force placed on the economy in either direction. However, a sharp rise in unemployment or a significant slowdown in economic activity, which would be indicated in data like the jobs report or ISM surveys, could prompt the Fed to accelerate rate cuts to support the economy.
From a technical perspective, the S&P 500 remains on solid footing. After the August pullback, the index has maintained key support levels, without showing any major warning signs. However, trading volume, particularly on up days, has decreased, suggesting softened conviction in the continued upward momentum.
Our Newton models indicate that international equities, particularly in emerging markets, are favored over U.S. equities. China’s recent announcement of substantial stimulus measures to support its stock market and broader economy has boosted these markets. Cyclical sectors like Materials, Industrials, and Consumer Discretionary are leading the charge.
Economic Releases This Week
Monday: Fed Chair Powell and Fed Governor Bowman Speak
Tuesday: S&P Manufacturing PMI, ISM Manufacturing, Fed Governor Cook Speaks, Fed Presidents Barkin, Bostic, and Collins Speak
Wednesday: ADP Employment, Fed Governor Bowman and Fed President Barkin Speak
Thursday: Initial Jobless Claims, S&P Services PMI, ISM Services
Friday: US Jobs Report, Fed President Williams Speaks
Stories to Start the Week
Roughly 45,000 dockworkers at 36 ports on the East and Gulf Coasts could go on strike as soon as tomorrow
GM led a $50m investment round for lithium extraction startup EnergyX, a move meant to help them towards their EV transition target of 2035
The number of Northerners heading to college at Southern public schools has skyrocketed 84% over the past two decades and jumped 30% from 2018 to 2022
UFC’s parent company agreed to pay $375 million to settle a lawsuit accusing it of tamping down fighters’ pay by making it hard for them to leave for rival promoters
What is Newton?
Our Newton model attempts to determine the highest probability of future price direction by using advanced algorithmic and high-order mathematical techniques on the current market environment to identify trends in underlying security prices. The Newton model scores securities over multiple time periods on a scale of 0-20 with 0 being the worst and 20 being the best possible score.
Trend & level both matter. For example, a name that moves from an 18 to a 16 would signal a strong level yet slight exhaustion in the trend.
Technical trading models are mathematically driven based upon historical data and trends of domestic and foreign market trading activity, including various industry and sector trading statistics within such markets. Technical trading models, through mathematical algorithms, attempt to identify when markets are likely to increase or decrease and identify appropriate entry and exit points. The primary risk of technical trading models is that historical trends and past performance cannot predict future trends and there is no assurance that the mathematical algorithms employed are designed properly, updated with new data, and can accurately predict future market, industry and sector performance.