Stocks take another step

The market may have gotten off to a slow start last week, but it finished with a flourish.

After stumbling out of the gate last Monday, the S&P 500 (SPX) closed the second week of October at a fresh record high as traders appeared to become more comfortable with what initially looked like a batch of less-than-friendly economic data, and embraced a solid start to earnings season:

The headline: Fifth-straight up week for SPX.

The fine print: Last Thursday’s Consumer Price Index (CPI) print may have been hotter than expected, but it still showed inflation was steady to lower in September. Meanwhile, weekly jobless claims were much higher than estimates, but the increase was largely attributable to Hurricane Helene. Finally, Friday’s mostly-cooler Producer Price Index (PPI) appeared to confirm that inflation was still on the right track.

The move: Last Thursday, the 10-year T-note yield pushed above 4.1% (intraday) for the first time since July 31, ending the day at 4.08%. The benchmark yield’s 35-basis-point increase since October 1 was its second-biggest seven-day jump since December 2022.

The scorecard: The Dow Jones Industrial Average (DJIA) led the market last week:

Sector returns: The strongest S&P 500 sectors last week were information technology (+2.6%), industrials (+2%), and financials (+1.9%). The weakest sectors were utilities (-2.7%), communication services (-1.2%), and consumer discretionary (-0.7%).

Stock movers: Scholar Rock (SRRK) +362% to $34.28 on Monday, Triumph Group (TGI) +21% to $14.12 on Thursday. On the downside, Scholar Rock (SRRK) -14% to $29.49 on Tuesday, 10X Genomics (TXG) -25% to $15.67 on Thursday.

Futures: Oil volatility reached new levels last week. November WTI crude oil tagged a nearly three-month high of $78.46 last Tuesday but closed down more than 4%. It then traded as low as $71.53 on Wednesday before rebounding, ending the week up $1.18 at $75.56. After slumping most of last week, December gold (GCZ4) capped the week with a strong Friday rally to close the week up $8.50 at $2,676.30. Week’s biggest gains: December cocoa (CCZ4) +9.5%, December palladium (PAZ4) +6.9%. Week’s biggest declines: November natural gas (NGX4) -7.7%, January lithium (LTHF5) -5.2%.

Retail Sales and housing numbers are highlights on this week’s lineup:

●Monday: Columbus Day/Indigenous Peoples' Day (US bond market closed)
●Tuesday: Empire State Manufacturing Index
●Wednesday: Import Price Index
●Thursday: Retail Sales, Philly Fed Survey, Industrial Production and Capacity Utilization, Business Inventories, NAHB Housing Market Index
●Friday: Housing Starts and Building Permits

The first full week of earnings season is still heavy on banks and other financials, but a few high-profile tech, pharma, energy, and consumer names also report their numbers. Here’s a sample:

●Monday: Karooooo (KARO)
●Tuesday: Albertson’s (ACI), Bank of America (BAC), Citigroup (C), Goldman Sachs (GS), Johnson & Johnson (JNJ), Progressive (PGR), UnitedHealth (UNH), Walgreen's (WBA), Smart Global (SGH), United Airlines (UAL)
●Wednesday: Abbott Labs (ABT), ASML (ASML), Morgan Stanley (MS), US Bancorp (USB), Alcoa (AA), Crown Castle (CCI), CSX (CSX), Kinder Morgan (KMI)
●Thursday: KeyCorp (KEY), Taiwan Semiconductor (TSM), Alaska Air (ALK), Netflix (NFLX), WD-40 (WDFC)
●Friday: American Express (AXP), Fifth Third Bancorp (FITB), Procter and Gamble (PG), Schlumberger (SLB)

Check the Active Trader Commentary each morning for an updated list of earnings announcements, IPOs, economic reports, and other market events.

While traders and investors have become accustomed to economic numbers being discussed primarily in terms of how they might affect monetary policy—that is, whether they will prompt the Fed to cut rates more or less aggressively—Morgan Stanley & Co. strategists suggest the central bank’s next move may not be that important.²

One reason is that it can take as much as a year for interest rate adjustments to make themselves fully felt throughout the economy—the “long and variable lag” of monetary policy. Also, the analysts suspect that much of the market’s volatility in recent months was due to concerns about a weakening economy, especially a softening labor market.

However, if the data weaken significantly in the coming months, even aggressive Fed cuts may not be in time to alter the economy’s trajectory, according to the analysts. But if the data remain solid, the Fed will have plenty of time to adjust its policy course—i.e., they won’t need to rush into anything. That suggests that it’s the numbers themselves, not the Fed’s next interest rate decision, that’s most important right now. And lately, those numbers have been more good than bad.

Click here to log on to your account or learn more about E*TRADE's trading platforms, or follow the Company on X (Twitter), @ETRADE, for useful trading and investing insights.

¹ Reuters. US weekly jobless claims surge amid Hurricane Helene distortions. 10/10/24.
² MorganStanley.com. Why the Fed’s Next Move May Matter Less. 10/4/24.