S&P 500 Sees Little Change Despite Blowout U.S. Jobs Data

Compared to the preceding two weeks, the first trading week of October 2024 saw very little change for the S&P 500 (Index: SPX). The index closed out the week at 5,751.07, just 0.22% higher than it closed out the previous week.

That slight increase had to be disappointing for Wall Street bulls, who might have expected the unexpectedly strong jobs report on Friday, 4 October 2024 to provide more of a boost for stock prices. But it didn’t, because that unexpectedly good news changed the expectations for the size of the Federal Reserve’s next cut to U.S. interest rates.

The CME Group’s FedWatch Tool slashed the probability of a half-point rate cut at the Fed’s upcoming 7 November 2024 meeting to nearly zero percent. It now projects over a 97% probability of a quarter point rate cut. Beyond that date, the FedWatch tool anticipates the Fed will continue a series of quarter point rate cuts at six-week intervals well into 2025, reaching at a target range for the Federal Funds Rate of 3.25-3.50% at its 17 September 2025 meeting.

In changing very little from the previous week, the trajectory of the S&P 500 moved closer toward the middle of the latest redzone forecast range on the alternative futures chart.

We’ll be rolling the chart forward to look ahead at the fourth quarter of 2024 in the next edition of the S&P 500 chaos series, which has yet another month of the current redzone forecast range to run through. Until next week, here are the headlines that moved the markets during the week that was:

Monday, 30 September 2024

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

• US East Coast port strike looms Tuesday with no talks scheduled

• Why are US East Coast ports going on strike and what products are affected?

Oil forecasts cut for 5th straight month on demand, OPEC uncertainty

• Crude oil closes worst quarter this year, as demand worries outweigh Middle East fears

Fed minions hear about risk of policy mistake they may be making, say they are not “in a hurry” to cut rates, but will if they don’t like the data they get:

• Fed’s Powell set to speak as economists fret about a policy mistake, election risk
• Fed sees no ‘hurry’ to cut rates as confidence in economy grows, Powell says

• Reactions as Powell suggests 50 bp more cuts in store for 2024

Exclusive: Fed’s Bostic open to another large rate cut if job market weakens

Fed’s Goolsbee reiterates case for extended path of rate cuts

Bigger stimulus, trouble developing in China:

• Painful policy choices loom after China’s ‘monumental’ consumer stimulus plan

• China to cut existing mortgage rates by the end of October
• Beijing eases home purchase rules to boost demand
• Iron Ore Spikes After Top Chinese Cities Ease Home-Buying Curbs

China’s factory, service sector activity skids

• China’s September factory activity cools notably, Caixin PMI shows
• China’s services activity slows, Caixin PMI shows

Bigger trouble developing in Japan:

• Japan factory output falls, casting doubts about pace of economic recovery

ECB minions being told Eurozone inflation isn’t a problem by those who want more rate cuts:

• German states point to lower inflation amid hopes for ECB easing

Nasdaq, S&P, Dow ended higher after Powell addressed Wall Street

• China stocks surge in biggest single-day rally since 2008 on stimulus cheer

• Chinese investors rush into stocks for fear of missing out on epic rally

Tuesday, 1 October 2024

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

• US dockworkers strike, halting half the nation’s ocean shipping

• Exclusive: Brent oil traders use little known rule to reroute US cargoes

Oil steady as prospect of more supply offsets Middle East conflict worries

US new vehicle sales fall in Q3 on fewer selling days, inflationary headwinds

Bigger trouble developing in Japan, BOJ minions standing by to not hike interest rates:

• Japan’s factory activity subdued on weak demand, PMI shows
• BOJ debated need for caution in rate hikes, Sept summary shows

Bigger trouble developing in Eurozone:

• European automakers most at risk from US dockworkers strike, analysts say
• Euro zone September factory activity took a turn for the worse, PMI shows

Nasdaq, S&P, Dow end lower as October starts with Iran launching missiles against Israel

Wednesday, 2 October 2024

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

• Oil prices jump more than 2.5% as Israel, US vow retaliation for Iran attack
• Coffee containers pile up at US ports during strike

• US port strike disrupts hamburger supplies, frozen seafood

Fed minions say inflation may not be going away just yet:

• Fed’s Barkin says price pressures may not fade as fast as expected

• Fed’s Barkin says rates were ‘out of sync’ before September cut, inflation fight not done

Bigger trouble developing in South Korea:

• S.Korea factory activity shrinks sharply as overseas demand weakens, PMI shows
• South Korea inflation cools more than expected as rate cut talk grows

BOJ minions thinking about their problems:

• In Bank of Japan chief’s birthplace, Ueda’s policy puzzle is laid bare

ECB minions getting ready for next rate cuts:

• ECB’s top hawk shifts tone with sanguine inflation message

S&P, Dow, Nasdaq end slightly higher in choppy session after Iran’s strike against Israel

• S&P 500 ends near flat as more jobs data awaited; eyes on Middle East

• Tech market values jump in September on Fed rate cuts, AI optimism

Thursday, 3 October 2024

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

• Dockworkers suspend strike until January, start moving goods

• US port strike throws spotlight on big union foe: automation

US office market shows signs of bottoming after big discount sales

Oil jumps 2% on Middle East supply fears

US service sector activity accelerates to 1-1/2-year high; employment declining

Fed minions given credit for other central banks’ rate cuts, rack up billions in losses, expect dockworkers strike will add to inflation:

• Bumper Fed rate cut supercharges central banks’ easing cycle in September
• Fed’s paper losses top the $200 bln mark
• Fed’s Goolsbee says dockworkers’ strike could lead to higher prices

BOJ minions say they don’t want to do much with interest rates:

• BOJ policymaker calls for slow, cautious movement on rate hikes

S&P, Dow, Nasdaq end lower; oil jumps 5% as Middle East conflict stokes supply concerns

Friday, 4 October 2024

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

• US Sept payrolls jump takes Nov 50 bp cut off the table
• Oil settles up, biggest weekly gains in over a year on Middle East war risk

Fed minions expected to deliver smaller rate cuts in months ahead:

• Fed seen slowing rate cut pace after strong US jobs data

• Fed’s Goolsbee calls jobs report ‘superb,’ still sees rate cuts ahead
• Surging jobs, wages, keep Fed base case of quarter point cuts on track

Odds slashed to zero of 50bp Fed rate cut in November after strong September payrolls

BOJ minions getting message from incoming JapanGov leadership to keep monetary policy super loose:

• BOJ’s rate hike plans face political curve ball

ECB minions starting to think they might have to deal with Eurozone recession:

• ECB’s Centeno warns of worrying first signs of cooling labour market

Nasdaq rises 1%, S&P, Dow finish higher after September jobs blowout

• Dow registers record high close as US jobs data eases economic worries

The Atlanta Fed’s GDPNow tool‘s projection of the real GDP growth rate for the current quarter of 2024-Q3 decreased to +2.5% from the previous week’s forecast of +3.1% growth.

Image Credit: Microsoft Copilot Designer. Prompt: “An editorial cartoon of a Wall Street bull looking disappointed despite stock prices being up slightly”.