October 14, 2024

Not that anyone is complaining, but on Friday to finish out a fifth straight winning week, the market started out modestly higher than then accelerated to the upside as the day moved along, resulting in a fifth straight higher week to records in both the Dow and S&P.

‍

So the former exploded upward again to a 409 point advance to a best-ever 42,863 led by the likes of JPM, WFC, BLK on earnings, in addition to AMGN, AXP, CAT, GS and JPM. So one can see the positive influence of the financial group here.

‍

The S&P also decided to join the upside party as well with a 35 point gain to a best-ever 5815 led by the large financials as just mentioned in addition to many of the large technology giants.

‍

The Nasdaq rose by 60 to 18,342 with the likes of some technology issues doing well but was restrained by the awful performance of TSLA after its farcical robotaxi outlook and the taking down of its founder who basically looked “lost” in his explanations. But the index was helped again by the shipping issues while the Russell 2000 really made a large gain of 46 to 2334, mainly due to the positive effect of the entire financial group. And the always “troubling” VIX dropped again down to a historically more normal 20.46 with two days to go in some really high-priced calls which do not seem to be able to be reached in the short-term.

‍

These ongoing equity index gains are consistent with the fact that third-quarter profit growth is currently estimated to be higher by 4% and a much stronger gain of around 14% for the fourth-quarter of this year.

‍

The S&P now trades at 21 times next year’s earnings while the Magnificent 7 go for a P/E of 28 while the equal-weighted number is around 17 times, so one can see the discrepancy in these statistics.

‍

WFC rose by 5.6% after reporting stronger profit for the latest quarter than analysts expected. It benefited from better results from its venture-capital investments and higher fees for investment-banking services, among other things.

‍

Banks and other financial giants traditionally kick off each earnings reporting season, and JPM climbed 4.4% after reporting a milder drop in profit than analysts feared. It was the strongest single force pushing upward on the S&P.

‍

CEO Jamie Dimon said the nation’s largest bank is also still buying back shares of its stock to send cash to investors, but the pace is modest “given that market levels are at least slightly inflated.” This is so typical of him to strangely downgrade its shares as it continues to move higher.

‍

BLK rose 3.6% after likewise delivering better profit for the latest quarter than analysts expected. The investment giant ended September managing a record $11.5 trillion in total assets for its customers.

‍

The gains for banks helped make up for the drag of TSLA, which tumbled 8.8% and was the heaviest weight on the market. The electric-vehicle maker unveiled its long-awaited robotaxi on Thursday night, but critics highlighted a lack of details about its planned rollout.

‍

Following the unveiling of the “Cybercab,” potential rival UBER jumped by 11% and was one of the strongest forces lifting the S&P. LIFT gained almost 10%.

‍

In the bond market, Treasury yields were mixed following the latest updates on inflation at the wholesale level and on sentiment among U.S. consumers.

‍

Prices paid by producers were 1.8% higher in September than a year earlier. That was an improvement from August’s year-over-year inflation level, but not as much as economists expected. Analysts said it likely helped calm worries stirred a day earlier, when a report showed inflation at the consumer level wasn’t cooling as quickly as economists expected.

‍

A separate report on Friday suggested sentiment among U.S. consumers is lower than economists expected. But the preliminary reading’s decline in sentiment was still within the margin of error.

‍

After Friday’s reports, traders built their bets that the Federal Reserve would cut its main interest rate by a quarter of a percentage point at its next meeting, according to data from CME Group.

‍

They have pared back their expectations from earlier this month, when some traders were betting on the possibility for another larger-than-usual cut of half a percentage point in November. A run of stronger than expected data on the economy recently has wiped out such calls.

‍

Regardless of how much the Fed cuts rates by at its next meeting, the longer-term trend for interest rates remains downward, and this should offer an upward push to stock prices generally.

‍

The Fed last month cut its main interest rate from a two-decade high as it widens its focus to include keeping the economy moving instead of just fighting higher inflation.

‍

The yield on the 10-year Treasury rose to 4.09% from 4.07% late Thursday. The two-year yield, which more closely tracks expectations for the Fed’s upcoming moves, edged down to 3.95% from 3.96%.

‍

In markets abroad, stocks fell 2.5% in Shanghai for their latest sharp swing ahead of a briefing scheduled for Saturday by China’s Finance Ministry. Investors hope it will unveil a big stimulus plan for the world’s second-largest economy.

‍

South Korea’s Kospi slipped 0.1% after its central bank cut interest rates for the first time in more than four years in hopes of boosting its economy.

‍

This week starts the main part of 3Q earnings results with the following lineup: Tuesday – BAC, SCHW, C, PNC, IRBK, JBHT and Dow components GS, JNJ and UNH; Wednesday – DSC, MS and USB, ASML, ABT; Thursday – BLK, Truist, ISRG, NFLX and TWS and Dow component TRV on Thursday; Dow components AXP and PG plus SLB on Friday.

‍

Economic reports will see: Thursday – September retail sales, weekly jobless claims, September industrial production; Friday – September housing starts.