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The S&P 500 Index closed Halloween week with a 1.4% decline.1 The yield on the 10-year U.S. Treasury climbed another 14 basis points (bps) to reach 4.38%,2 marking a significant 76-basis-point increase from its local low on September 16, 2024.3 Investors are carefully digesting both macroeconomic signals and corporate earnings data, setting the stage for what could be the most pivotal week of the year for financial markets.
On the macroeconomic front, the Bureau of Economic Analysis reported that Q3 2024 real gross domestic product (GDP) grew by 2.8%,4 driven primarily by robust consumer spending. However, the labor market showed signs of softening, with September job openings declining by over 400,000 to 7.44 million,5 the lowest level since January 2021.6 Additionally, nonfarm payrolls rose by only 12,000,7 a number substantially impacted by the Boeing strike and hurricanes Helene and Milton. The unemployment rate remained stable at 4.1%.8
On the corporate earnings side, the spotlight was on results from the five mega-cap technology companies. Investor reactions varied, with Amazon seeing a 6% gain after its earnings release,9 while Microsoft faced a 6% drop,10 reflecting concerns over the returns on heavy artificial intelligence (AI) investments by these tech giants. The question of whether these substantial AI investments will eventually pay off remains open.
Looking ahead to this week, the U.S. presidential election is set for November 5 and the outcome could have far-reaching effects on economic policy and market sentiment. The Federal Open Market Committee’s penultimate meeting of 2024 will occur on November 6 and 7. Markets are anticipating a 25-basis-point rate cut.11 On the data front, Tuesday will feature October’s Institute for Supply Management’s (ISM) Services data,12 while Friday will provide the University of Michigan's preliminary consumer sentiment survey results for November.13 Last but not least, 103 S&P 500 Index companies are scheduled to report Q3 earnings.14
Sources:
1-13Bloomberg
14Factset – S&P 500 Earnings Season Update: November 1, 2024
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