Mid-Week Market Minute 10.9.24

Stocks Mixed; CPI Report on Thursday

Stocks were mixed in early trading this week as U.S.-listed China stocks struggled following a strong rally in the week prior. The S&P 500 was higher heading into Wednesday; however, sentiment on tech stocks turned cautious after the U.S. Department of Justice (DOJ) warned it may pursue a breakup of Alphabet (Google), the leading search engine firm. 

On one hand, the economy continues to remain on solid footing; however, higher valuations in stocks remain a valid concern. The forward 12-month P/E ratio for the S&P 500 is about 21.5, above the five-year average of 19.5, and above the 10-year average of 18. Still, higher valuations have been around for a while and could persist if the backdrop for markets remains strong. The next month will bring the bulk of third-quarter corporate earnings results for the S&P 500, which are expected to grow by more than 4% on a year-over-year basis. In addition, the Atlanta Fed recently updated their forecast for third-quarter real GDP growth, which saw a strong upward revision from 2.5% to 3.2%. We’ll also get another look at inflation on Thursday of this week, where both headline and core CPI are expected to show disinflation on a month-over-month basis.

In bonds, we’ve seen a meaningful sell-off in interest rates (rates moving higher) in the wake of a much stronger-than-expected jobs report last Friday. This stoked concerns the Fed may not cut interest rates as fast as the markets were expecting. As a result, futures markets are now pricing in just two 0.25% rate cuts between now and the end of the year, which would bring the Fed Funds rate from an upper target of 5% today to 4.5% by year-end. After finishing September around 3.75%, the yield on the 10-year Treasury note has risen to 4.05% today.

Source: GSAM, CNBC, JPMorgan, FactSet.

This communication is for informational purposes only. It is not intended as investment advice or an offer or solicitation for the purchase or sale of any financial instrument.

Indices are unmanaged, represent past performance, do not incur fees or expenses, and cannot be invested into directly. Past performance is no guarantee of future results.