Arrival of China's Stimulus Boosts S&P 500

The biggest market moving story for the S&P 500 (Index: SPX) in the final full trading week of September 2024 continued to be the stimulus measures the Chinese government will use to boost China’s troubled economy. That story similar to what played out last week, with one key difference. Instead of leaving it up to speculation for what they would do, China’s government followed through and rolled out several measures to juice the country’s economy.

That boosted stock prices, especially in China and throughout Asia, which saw their best week since 2008. But lots of U.S. companies will benefit from increased economic activity in China, which is why the S&P 500 climbed along with news of China’s stimulus rollout on Monday, Tuesday and Thursday. The index ended the week up 0.6% from the previous week at 5,738.17. The S&P even a new record high of 5,745.37 on Thursday before retreating a little over 0.1% to close the week.

That small increase was enough to keep the index’ trajectory tracking along in the upper portion of the redzone forecast range indicated in the latest update of the alternative futures chart.

Here’s a more complete sampling of the market-moving news headlines from the week that was.

Monday, 23 September 2024

• Signs and portents for the U.S. economy:

• Oil settles lower on weak euro zone business activity

• Oil firms evacuating US Gulf of Mexico staff as hurricane threat rises

US Manufacturing PMI Plunges To 15-Month Lows; Prices Are Soaring Again

Fed minions really worried about jobs in U.S. and will keep cutting rates because of their fears, really don’t want to be holding so many Mortgage Backed Securities:

• Fed officials say risks to jobs warranted rate cut as debate shifts to pace of easing

• Fed’s Goolsbee sees ‘many more’ rate cuts ahead

Fed’s Kashkari says 50 basis points rate cut was ‘right decision’

Fed paper sketches out slow slog to unload central bank’s mortgage bonds

Bigger stimulus slowly developing in China:

• China’s Central Bank Injects Cash, Lowers 14-Day Reverse Repo Rate

• China Launches More Stimulus: PBOC Cuts Rates, Announces Rare Press Conference On Support For Economy

Bigger trouble developing in Eurozone, ECB minions say Eurozone exports can’t compete well enough:

• Euro zone business activity unexpectedly contracts in September, PMI shows
• Euro zone exporters facing persistent competitiveness struggle, ECB says

Nasdaq, S&P, Dow ended slightly higher in a rather muted trading session

Tuesday, 24 September 2024

• Signs and portents for the U.S. economy:

• Oil climbs on China stimulus, Middle East conflict and hurricane risk
• Fed’s rate cut offers limited relief for US factories facing China competition
• US fiscal profile set to weaken under next administration, Moody’s says
• US monthly house prices edge up in July

Bigger stimulus finally arrives in China:

• China’s central bank unveils most aggressive stimulus since pandemic

• China Panics: Cuts Multiple Rates And Reserve Ratio Requirements, Goes All-In To Prop Up Stocks
• China’s central bank unveils broad easing measures to revive economy

China stimulus pushes global shares to new peak, boosts commodities

• Asia stocks hit 2-1/2-year high on China’s stimulus measures

China’s bigger troubles showing up in Japan, BOJ says they won’t rush to raise Japan’s already low interest rates:

• Japan’s Sept factory activity slips, PMI shows
• BOJ chief signals no rush to raise rates further

Bigger trouble developing in Eurozone, ECB minions thinking they’ll need to cut rates well into 2025:

• Exclusive: German economy expected to contract again in 2024, say sources
• ECB’s Knot sees rate cuts through the first half of 2025

S&P 500, Dow close at new highs as mining stocks rise on China stimulus boost

• S&P, Dow close at record highs, Nasdaq up as China stimulus offsets dour consumer data

Wednesday, 25 September 2024

• Signs and portents for the U.S. economy:

• Shippers scramble for workarounds ahead of looming US East Coast port strike

• Bananas, cars, and clothes: US port labor dispute threatens range of products

US 30-year mortgage rate slips to 6.13%, refinancing jumps

• US new home sales fall less than expected; median house price declines

Oil declines as investors weigh whether new China stimulus will boost demand

Worries develop over possibility Fed minions ‘outsize’ rate cut will enable inflation:

• Fed’s bumper rate cut revives ‘reflation specter’ in US bond market
• Fed’s Kugler strongly supported half-percentage-point rate cut

Bigger stimulus not enough to offset bigger trouble developing in China?

• China’s monetary volleys miss key threat to economic growth
• China weighs injecting $142 bln of capital into top banks, Bloomberg News reports

BOJ minions waiting for new political leadership to set direction:

• Japan’s leadership race clouds BOJ’s rate hike path

ECB minions get data to support their next rate cut in October:

• ECB sees further signs of easing wage pressures

Dow, S&P 500 end lower, back off record highs; Nasdaq edges up

• Stocks struggle as China stimulus boost fades

Thursday, 26 September 2024

• Signs and portents for the U.S. economy:

• Oil prices slide on prospects Saudi Arabia to raise output
• US second-quarter economic growth unrevised; GDI revised sharply higher
• US 30-year fixed-rate mortgage dips to 6.08%, lowest since Sept 2022

• US pending home sales hover near record low in August, NAR says

Fed minions thinking about how to make emergency funds more easily available to banks, how to shrink their balance sheet, and how to better use interest rate benchmarks:

• Fed’s discount window can be normal funding source for banks, Barr says

• Fed’s Bowman says discount window use is for emergencies

NY Fed’s Perli says there is plenty of room left to run in shrinking Fed holdings

Fed’s Williams announces new effort on reference rates

Bigger stimulus rolling out in China:

• China vows ‘necessary spending’ to hit economic growth target

• Exclusive: China to issue $284 billion of sovereign debt this year to help revive economy
• Chinese banks in need of capital injection to give thrust to economic stimulus steps

ECB minions thinking about when, how much to cut Eurozone interest rates:

• Exclusive: ECB doves to push for rate cut in Oct, hawks to dig in – sources

Wall Street ticks to another record as stocks worldwide rally

• China’s stimulus-led stock rally pulls Asia and Europe higher; oil falls

Friday, 27 September 2024

• Signs and portents for the U.S. economy:

• US consumer spending, inflation rise moderately in August
• Oil steady but set for weekly drop on higher supply outlook

Fed minions increasingly expected to deliver another half point rate cut in November 2024:

• Fed seen cutting rates another 50 bps in November

• Fed is aligned on rate cuts, but upcoming data will shape the pace
• Fed’s Cook says she ‘wholeheartedly’ supported half-point rate cut
• Fed should cut interest rates ‘gradually,’ Musalem says

Bigger trouble leads to bigger stimulus developing in China:

• China’s industrial profits suffer biggest slump this year, adds to economic woes

• China’s factory activity seen extending declines in Sept: Reuters poll

China launches late stimulus push to meet 2024 growth target

• China cuts short-term borrowing costs

BOJ minions bracing to continue keeping interest rates in Japan low:

• Japan factory output seen down on weak overseas demand, typhoon disruptions: Reuters poll
• Core inflation in Japan’s capital matches BOJ target

Bigger trouble developing in Eurozone leading ECB minions to think about cutting rates again:

• Poor euro zone data flow keeps adding to case for ECB rate cut

S&P 500 ends week up more than 1% as favorable data, China stimulus ripple through markets

• China-linked stocks climb on bevy of stimulus measures

The CME Group’s FedWatch Tool projects more rate cuts ahead. It projects better than even odds of another half point rate cut on 7 November 2024, followed by a continuing series of 0.25%-0.50% rate cuts at approximate six-to-12-week intervals well into 2025.

The Atlanta Fed’s GDPNow tool‘s projection of the real GDP growth rate for the current quarter of 2024-Q3 rose to +3.1% from the previous week’s forecast of +2.9% growth.

Image credit: Microsoft Copilot Designer. Prompt: “An editorial cartoon of a smiling Wall Street bull looking at a news ticker in Times Square that says ‘CHINA TO STIMULATE ECONOMY’” We tweaked the text in the image to say ‘CHINA STIMULATES ECONOMY’ to make it up to date for this week.