Asset Management Weekly Market Commentary

Market updates for the week ending October 18, 2024

Key observations

• A solid start to quarterly earnings season kept the uptrend in place for U.S. large cap indices last week as a handful of bellwether banks and brokers in the financial services sector set a positive tone for the remainder of the reporting period.
• Economically sensitive sectors such as consumer discretionary, financial services, materials, and real estate, along with utilities outpaced growthy and defensive sectors as earnings releases and stronger economic data provided upside catalysts. This leadership profile allowed small- and mid-cap (SMid) indices to outperform on the week due to higher exposures to these sectors.
• Treasury yields content to move sideways in the holiday-shortened trading week as fixed income investors digest economic data and attempt to distinguish signal from noise. The 10-year Treasury yield traded between 4% and 4.10% over the balance of the week, bringing some relative calm to the bond market. But calm could give way to a sizable move for yields – in either direction - in the coming weeks given the key economic and labor market datapoints to be released into month-end and early November.

What we're watching

• Quarterly reporting season ramps up in the coming week with just shy of 25% of the S&P 500 set to post results. The consumer staples, financial services, information technology, and industrials sectors will be well represented in the coming week, and we will be paying the most attention to results out of semiconductor and data center-related stocks, as well as engineering and construction plays and railroads for a read on the state of the U.S. economy entering 4Q24.
• Initial jobless claims for the week ended October 19 and continuing jobless claims for the week ended October 12 are released Wednesday. Initial claims are expected to come in at 240k, a notch below the prior week’s reading of 241k. Continuing claims are expected to rise to 1,876k from 1,867k the prior week. Labor market data has been based off low survey response rates for some time now and has been rife with seasonal adjustment and weather-related noise so we hesitate to put much stock in the data rolling in but will be monitoring the trend in initial and continuing claims for continued signs of stabilization.
• Tokyo (Japan) October Consumer Price Index (CPI) is released Thursday and is expected to rise 1.8% year over year, which would be a notable deceleration from 2.2% year over year in September. Of late, the Japanese yen has weakened relative to the U.S. dollar as the Bank of Japan has been able to talk down the prospect of additional policy tightening in the coming months, but even a modestly hotter CPI reading could bring the BoJ back into play and put upward pressure on the yen and downward pressure on Japanese equities.