S&P 500 Retreats as Bearish Change in Interest Rates Scares Bulls

Even though the U.S. Federal Reserve cut short term interest rates in the U.S. by a half point last month, longer term interest rates seem to have other ideas. Those rates increased in the past week. The bearish change spooked investors into backing off some of their recent bullish investments in stocks that would benefit from falling interest rates.

That change resulted in the S&P 500 (Index: SPX) falling by one percent from the record high it set a week earlier. The index closed at 5,805.03 on Friday, 27 October 2024.

That decrease pushed the trajectory of the S&P 500 closer to the middle of the alternative future chart’s redzone forecast range. The latest update to the chart shows the level of the S&P is consistent with the redzone forecast, which now has just one more week to go.

Here are the past week’s market-moving headlines.

Monday, 21 October 2024

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

• Oil prices rise nearly 2%, recovers some of last week’s 7% decline
• Speedy US corn and soy harvests strain farmers, storage capacity
• Why Are Long-Term Bond Yields Rising Despite Rate Cuts?

Fed minions talk up modest rate cuts along with balance sheet reduction, say more weakness in job market would make them cut rates faster:

• Fed’s Logan eyes more gradual rate cuts amid more balance sheet cuts
• Fed’s Kashkari: Job market weakness could mean faster rate-cut pace

Bigger stimulus developing in China:

• China cuts key lending rates to support growth

Dow, S&P, Nasdaq close mixed as attention shifts to earnings

• Dow, S&P end down as Treasury yields rise, investors eye earnings

Tuesday, 22 October 2024

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

• Oil settles up 2% as Middle East war rages and supplies tighten

Fed minions excited to cut rates, not sure how fast:

• Four Fed policymakers favor more rate cuts, but differ on pace
• Fed needs to continue to cut rates, Daly says

Mixed signals developing in China:

• China’s youth unemployment rate falls after climbing for two straight months
• China’s Singles’ Day sales festival fails to inspire consumers

China stimulus slammed as inadequate by U.S., IMF officials counting on them:

• China’s stimulus measures not enough, Yellen and IMF chief economist say

• Focus: China’s exporters run for cover as US election nears

ECB minions claim Eurozone inflation is going exactly as they expect, say they need to communicate better:

• No signs that euro zone inflation will deviate from current projections, ECB’s Escriva says
• ECB’s Kazimir: increasingly confident in disinflation path
• ECB needs clearer communication – but not dot plots, Nagel says

Wall St closes little changed while investors digest yields, earnings

• S&P 500 posts two-day losing streak for first time since early September
• Polymarket Is Singlehandedly Moving The Entire US Bond Market

Wednesday, 23 October 2024

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

• The elusive number keeping Treasury yields at their highest levels in 3 months
• Oil prices rise more than 1% amid concerns on Mideast tensions

• US fuelmakers to report lower Q3 profits on weaker margins, fuel demand

US existing home sales slide to 14-year low; prices stay elevated

Fed minions starting to worry about “extend and pretend” banking practices on bad loans:

• NY Fed says banks obscuring commercial real estate risks by extending loan terms
• Fed hawks and doves: what US central bankers are saying

Bigger stimulus developing in China:

• China think tank proposes $280 billion stock market stabilisation fund

BOJ minions think inflation is running behind their schedule:

• BOJ chief says it is ‘still taking time’ to hit inflation goal

ECB minions thinking about whether they need to deliver bigger rate cuts in Eurozone:

• ECB starting to debate if rates have to go below neutral, sources say

Wall Street closes down, pressured by tech losses and worries about rates

• Nasdaq posts worst day since early September as tech slides ahead of Tesla results

Thursday, 24 October 2024

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

• US labor market plodding along, but jobs becoming more scarce
• US 30-year fixed-rate mortgage rises to 6.54%

• Why mortgage rates are back up to nearly 7%
• 10-year Treasury yield slips from 3-month closing high as buyers step in

US new home sales highest in nearly 1-1/2 years in September

Fed minions starting to think inflation may still be a problem:

• Fed’s Hammack: Work to bring inflation to target not complete

Bigger trouble developing in Japan, BOJ minions staring to think they might get away with another rate hike:

• Japan’s factory activity dips for 4th straight month, PMI shows
• BOJ may offer less dovish signs as US recession fears ease, rates on hold

Bigger trouble developing in Eurozone, ECB minions too early to consider cutting rates faster:

• Euro zone business activity stuck in a rut, survey shows

• German business activity contracts at slower pace in October, PMI shows

ECB does not need to contemplate below-neutral rates now, Latvia c.bank chief says

Tesla helps S&P snap three-day losing streak, boosts Nasdaq; Dow ends in the red

• Tesla rallies most in over a decade on Musk’s bold EV forecast

Friday, 25 October 2024

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

• Oil settles up, weekly gain 4% as investors weigh Middle East risk and US election

BOJ minions get old problem:

• Core inflation in Japan’s capital slips below BOJ’s target

ECB minions expected to deliver another Eurozone interest rate cut, told to not stand in way of banks looking to avoid failures through mergers:

• ECB probably to cut rates by 25 basis points in Dec, Bloomberg News reports
• Euro zone governments should not interfere with bank consolidation, bank execs say

Nasdaq pulls back after new record, ends higher; S&P snaps six-week win streak

• Nvidia catches Apple in race to world’s most valuable company

The CME Group’s FedWatch Tool anticipates a 0.25% rate cut on 7 November 2024 with additional 0.25% cuts at 6-to-12-week intervals through 17 September 2025. The CME FedWatch tool sees the Federal Funds Rate bottoming at a target range of 3.25-3.50% at that time.

The Atlanta Fed’s GDPNow tool‘s projection of the real GDP growth rate for the current quarter of 2024-Q3 ticked up to +3.4% from the previous week’s forecast of +3.3% growth.

Image credit: Microsoft Copilot Designer. Prompt: “An editorial cartoon of a bear wearing a Halloween costume and scaring a Wall Street bull”.