Key Takeaways
- The September jobs report, due Friday, comes as the Federal Reserve is eyeing the labor market ahead of its upcoming meeting.
- Investors will also get reports on PCE inflation and the third-quarter GDP. Housing and manufacturing data is also on tap.
- Reports are coming from Big Tech firms like Google, Microsoft, Meta, Apple, and Amazon. Big pharmaceutical firms, restaurant chains and oil producers also have results on the way.
US Term Premiums Rise as Higher Rates and Growing Debt Push Yields Up
Term premiums for US Treasury bonds turned positive in September, marking the first time in years investors received extra compensation for lending over the long term. This shift is driven by the Federal Reserve’s signal that interest rates will remain elevated for an extended period, as well as increased government debt issuance to cover a widening budget deficit. The term premium reflects risks like inflation and market supply-demand dynamics, with bondholders requiring higher yields for longer maturities. The Fed’s ongoing reduction of its debt holdings has further pressured demand, leading to an increased term premium.
S&P 500 Sees First Gain This Week as Tesla Soars 21%, Treasuries Rebound
Stocks rose for the first time this week, with the S&P 500 gaining 0.1% and Tesla surging 21% on strong earnings and forecasts. UPS shares jumped 5% on profit growth. Treasuries rebounded, while oil slipped due to oversupply concerns. Market focus remains on corporate earnings, the Federal Reserve’s rate outlook, and the upcoming US presidential election.
Trudeau Cuts Immigration Targets Amid Declining Public Support and Strained Resources
Prime Minister Justin Trudeau has announced a sharp reduction in immigration levels, aiming to admit 20% fewer permanent residents in 2024. The move follows public backlash over record inflows that strained housing, healthcare, and jobs. This marks the first reduction in immigration targets since Trudeau took office in 2015. The new plan also limits temporary residents, potentially shrinking Canada’s population for two consecutive years before modest growth resumes in 2027.
US Consumer Sentiment Hits Six-Month High as Rate Relief Boosts Buying Confidence
US consumer sentiment reached a six-month peak in October, with the University of Michigan’s index rising to 70.5, driven by optimism around buying conditions and lower financing costs. Consumers expect inflation to rise at 2.7% annually over the next year, while sentiment around durable goods purchasing rose to a four-month high. Additionally, Republicans showed increasing confidence as the US election approaches, reflecting political optimism.
Elon Musk’s Wealth Jumps $34 Billion as Tesla’s Strong Quarter Boosts Stock
Elon Musk’s net worth surged by $33.5 billion, reaching $270.3 billion, as Tesla’s stock soared 22% after reporting its highest quarterly profit since mid-2023. Musk projected up to 30% growth in vehicle sales and revealed the Cybertruck turned a profit. This growth, fueled by Tesla’s future in autonomous vehicles, places Musk significantly ahead of Jeff Bezos in the billionaire rankings. His active support for Donald Trump and investment in a Republican super PAC have also spotlighted him as a potential head of a new “Department of Government Efficiency” if Trump is re-elected.
UnitedHealth Shares Plunge After Rare Earnings Miss and Disappointing 2025 Forecast
UnitedHealth Group’s shares dropped over 10% after its 2024 and 2025 earnings forecasts missed Wall Street’s expectations, marking the company’s steepest single-day decline in four years. Facing increased medical costs, reduced Medicaid funding, and lower Medicare payments, the health-care giant projected a top adjusted earnings of $30 per share in 2025, below analysts’ $31.16 average estimate. UnitedHealth’s medical-loss ratio of 85.2% and increased expenses following a hack compounded investor concerns, dragging down stocks of other health insurers like CVS and Humana as well.
Five US Industries with High Stakes in Presidential Election
The upcoming US presidential election will significantly impact major industries, including banking, healthcare, energy, electric vehicles, and retail. Big banks face varied regulatory futures, with Harris favoring higher capital requirements, while Trump likely supports deregulation. Healthcare companies like UnitedHealth could see revenue shifts if subsidies change. The EV industry stands to benefit from continued incentives under Harris, while Trump may cut them. Retailers face the risk of tariffs on imports, especially from China, if Trump wins. Finally, the energy sector’s regulations could shift sharply, with fossil fuels favored by Trump and clean energy supported under Harris.
Pentagon Inspector General to Audit Israel’s Use of US Weaponry
The Pentagon’s inspector general has initiated an audit to review Israel’s management of US-supplied weaponry, including missiles, drones, and night vision technology, focusing on “proper use, storage, and physical security.” This audit, which falls under the Pentagon’s monitoring of sensitive defense articles provided to allies, will examine oversight practices for US military aid to Israel. However, it won’t address accusations regarding the use of US-supplied munitions in civilian areas. The audit mirrors similar reviews conducted in Ukraine and Iraq, aiming to uphold accountability without impacting immediate US-Israel relations.
BMW, Mercedes Sales Plunge in China as Local EV Makers Dominate Market
BMW and Mercedes-Benz saw a sharp drop in sales in China, with BMW’s sales falling 30% and Mercedes’ by 13% in Q3 2024. German automakers are losing ground to Chinese electric vehicle (EV) brands like BYD, as EVs now make up over 50% of China’s car market. The shift, coupled with China’s economic slowdown and possible trade tensions, is challenging luxury brands that have traditionally dominated gasoline car sales in China.
Morgan Stanley Reverses Course on SK Hynix Price Target Amid Regulatory Scrutiny
Morgan Stanley raised its price target for SK Hynix Inc. after previously downgrading the stock, a move that led to a review by South Korea’s Financial Supervisory Service. Despite strong quarterly results and rising demand for SK Hynix’s high-bandwidth memory chips, Morgan Stanley maintained an underweight rating, citing potential revenue and pricing challenges ahead. SK Hynix shares have surged over 40% year to date, reflecting its growth in the AI memory chip market.
*The viewpoints are attributed by Wallis Zeng.
Market Momentum Slows, But Long-Term Outlook Remains Positive: AimStar’s Take on Diversification Opportunities
Uptrend Still in Place, but Some Short-Term Caution Needed:
AimStar remain positive on the stock market over the next 12 months, supported by the Federal Reserve’s easing cycle. However, momentum is starting to slow down. We’re seeing signs such as fewer stocks making new highs and defensive sectors (like utilities and healthcare) showing strong performance, which usually signals potential market weakness. The current sentiment suggests that the market could experience a short-term pullback. Despite this, we recommend using any dips as a chance to accumulate stocks as the broader uptrend is still intact.
Rising Concerns on the Horizon:
There are a few growing concerns impacting the market. Recently, East Coast port closures and escalating tensions in the Middle East have spooked investors. These events could disrupt supply chains, particularly in the retail industry, which depends heavily on these ports. On the flip side, geopolitical risks have boosted defense stocks, as we’ve seen a breakout in the Aerospace & Defense sector.
Strong September Performance Defies Expectations, but Election Year Could Add Volatility:
September is usually a weak month for stocks, but this year, the S&P 500 posted a 2.02% gain, defying its usual negative trend. However, with the upcoming election, October might see some volatility or consolidation. Still, any market dips should be viewed as buying opportunities, as the long-term outlook for stocks remains strong.
Market Signals Remain Positive:
In the medium to long term, things are looking good for equities. Around 76% of stocks in the S&P 500 are trading above their 50-day and 200-day moving averages, which is a positive sign. Additionally, riskier sectors like consumer discretionary are outperforming defensive sectors, indicating that the market is positioning itself for more upside over the next 12-18 months.
Focus on Diversification:
For the past year and a half, concentrated bets on a few large stocks have worked well. However, the market is now broadening out, and we believe a diversified approach will be more effective. Historically, when markets become highly concentrated, it often sets the stage for more average stocks to catch up, which is good news for diversified portfolios.
*The viewpoints are attributed by Tony Yuan
Tesla Falls Further as Reported Robotaxi Delay Weighs on EV Maker
Reported on July 12 by AIMSTAR.CA – Tesla (TSLA) shares are slipping more than 1% in premarket trading after suffering the steepest losses of any S&P 500 constituent Thursday with an 8.4% plunge on a report the EV maker is postponing its robotaxi unveiling by two months. The company previously indicated it would hold an event to introduce the autonomous vehicles on Aug. 8, but Bloomberg reported the presentation has been pushed back to October. Tesla shares entered Thursday on an 11-session winning streak to move into the green for the year, fueled by its better-than-expected second quarter deliveries report, but returned into negative territory for 2024 on yesterday’s plunge.
U.S. Inflation Cools, Possible Fed Rate Cut in September
Reported on July 11 by AIMSTAR.CA – U.S. inflation slowed in June, mainly due to reduced housing costs, raising the possibility of a Federal Reserve rate cut in September. Core CPI, excluding food and energy, increased by just 0.1% from May and 3.3% year-over-year, marking the slowest rise in over three years. Overall CPI fell 0.1% from the previous month. The labor market showed mixed signals, with high jobless benefit applications but a drop in first-time filings. Traders anticipate a rate cut in September, and Fed Chair Jerome Powell emphasized that decisions will be data-driven.
July 15 – July 19 COMING UP
- Federal Reserve Chairman Jerome Powell speaks on Monday, with other Fed officials making remarks throughout the week.
- Goldman Sachs, Bank of America, and Morgan Stanley are among the major bank earnings coming this week.
- Netflix and Johnson & Johnson also report earnings this week, while Amazon hosts its annual Prime Day sales event.
- The Republican National Convention will feature remarks from presidential candidate Donald Trump.
The most anticipated earnings releases for the week of October 28, 2024 are Amazon #AMZN, AMD #AMD, SoFi #SOFI, Microsoft #MSFT, Apple #AAPL, Meta Platforms #META, Alphabet #GOOGL, Intel #INTC, PayPal #PYPL, and Eli Lilly #LLY.
Published by Vikki Zhao
October 28, 2024, 10:00 AM EST. 6 min read