What’s Up In The Market

Week Ending September 27, 2024

Weekly Market Summary

Global Equities: Stocks continued to advance during weekly trading in anticipation of continued progress in inflation and expectations of further easing from the Fed for the remainder of the year. The S&P 500 added 0.6% while the Nasdaq Composite and Dow Jones Industrial Average both gained 1.0% in the week. Small Cap stocks saw choppy trading during the week and ended in the red, down -0.2%. The big winner for the week was Emerging Markets, which surged after China announced stimulus measures designed to rescue the country’s economy. Emerging Markets were up 6.6% during the week. Developed International Stocks also outperformed their domestic counterparts with a 2.0% weekly gain.

Fixed Income: The 10-Year Treasury was unchanged during the week at 3.75%. There was strong demand for Treasury bonds auctioned on Thursday, which included $44 billion in seven-year notes. High yield bonds were relatively flat, up 0.1% during the week.

Commodities: US West Texas Intermediate Crude oil prices slipped back below $70 a barrel, pressured by news that Saudi Arabia would abandon its $100 crude target and related production cuts to recapture lost market share. Gold prices hit a fresh high above $2,700 an ounce during the week before slipping to $2,675 on Friday.

Weekly Economic Summary

Fed’s Inflation Gauge Improves: The latest reading of the Fed’s preferred inflation measure, Core Personal Consumption Expenditures (PCE), showed inflation continues to make progress towards the 2% target, albeit slowly. Monthly Core and Headline PCE were both 0.1%, translating to annual rates of 2.7% and 2.2%, respectively. Annualizing the last 3 months of Core PCE data shows that more recent inflation data has now been trending at the 2% level for the second consecutive month.

GDP Growth Confirmed: The final estimate of second quarter GDP growth confirmed prior data showing the US economy expanded at a 3.0% pace. The US economy is expected to maintain its impressive growth in Q3 as well. The Atlanta Fed’s GDPNow model was revised higher on Friday and is now projecting a 3.1% growth rate in the third quarter.

China Stimulus: Seeking to rescue the troubled property market and prevent a larger economic calamity, the Chinese government announced stimulus measures this week, which were celebrated by investors with the best weekly performance in 25 years for Chinese stocks. Among the measures were a reduction in the amount of cash banks must hold as reserves, roughly $285 billion in sovereign bonds, and measures intended to encourage home purchases.

Chart of the Week

The Chart of the Week shows the Core PCE Index, measuring inflation (ex-food and energy) by annualizing three-, six-, and twelve-month data. While Core PCE is still running at 2.7% annually, the shorter-term measures show that the recent trend is quickly approaching the 2% target. Barring a surprise uptick in monthly inflation data, the annual rate should fall in the first quarter of 2025 as the hot data points from January-March fall off the calculation. The Fed has noted on numerous occasions that the 3–6-month trend is the best indicator of actual inflation, so this data makes the case for more aggressive rate cuts.

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