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Stock Market Wrap-Up: October 11, 2024 – A Day of Caution and Mixed Signals
The U.S. stock market closed on October 11, 2024, with a mix of caution and optimism, as investors grappled with the latest economic data and its implications for future Federal Reserve actions.
Market Performance
All three major indexes ended the day in negative territory, albeit modestly. The Dow Jones Industrial Average ($DJI) slid 0.1% or 57.88 points to close at 42,454.12 points. The S&P 500 declined 0.2% or 11.99 points, settling at 5,780.05 points. The tech-heavy Nasdaq Composite ($IXIC) shed less than 0.1% or 9.57 points to finish at 18,282.05 points.
Sector Performance
The Communication Services Select Sector SPDR ($XLC) fell 0.7%, while the Real Estate Select Sector SPDR ($XLRE) declined 0.8%, making them the worst performers of the day. The Industrials Select Sector SPDR ($XLI) lost 0.5%, with nine out of the 11 sectors of the S&P 500 ending in negative territory.
Economic Data: CPI and Jobless Claims
The market's retreat was largely driven by the release of the Consumer Price Index (CPI) data. The CPI rose 0.2% month-over-month in September, matching August's increase but exceeding the consensus estimate of a 0.1% rise. On a year-over-year basis, CPI increased 2.4%, the smallest rise in over 3.5 years. This data kept hopes alive for another Federal Reserve rate cut in November, despite being higher than expected.
Core CPI, excluding volatile food and energy prices, rose 3.3% year-over-year, slightly above the consensus estimate of 3.2%. These figures raised concerns that the Federal Reserve might slow its pace of future rate cuts. Markets still price in an 85% chance of a 25 basis points rate cut in the November policy meeting, according to the CME’s FedWatch tool.
Jobless Claims
The Labor Department's report on jobless claims added to the market's unease. Jobless claims totaled 258,000 for the week ending October 5, an increase of 33,000 from the previous week's unrevised level of 225,000. The four-week moving average rose to 231,000, up 6,750 from the previous week's average. Continuing claims also increased to 1,861,000, up 42,000 from the previous week's revised level.
Market Sentiment and Volatility
The fear-gauge CBOE Volatility Index ($VIX) was up 0.34% to 20.93, indicating increased market anxiety. Decliners outnumbered advancers on the NYSE by a 1.39-to-1 ratio, and on the Nasdaq, a 1.59-to-1 ratio favored declining issues. Total trading volume was 11.02 billion shares, lower than the last 20-session average of 12.06 billion.
Tech Stocks Under Pressure
Tech giants felt the brunt of the market's caution. Apple Inc. ($AAPL) shares declined 0.2%, while Microsoft Corporation ($MSFT) fell 0.4%. These declines were part of a broader tech sector pullback, reflecting investor concerns about the economic outlook and potential Fed actions.
Banking Sector and Earnings Season
Despite the overall market decline, the banking sector showed resilience as earnings season kicked into high gear. Shares of Wells Fargo ($WFC) were up more than 3% in premarket trading, while JPMorgan Chase ($JPM) and Bank of New York Mellon ($BK) each rose 1% ahead of the opening bell. These gains were a welcome respite in an otherwise cautious market.
Energy and Commodities
Crude oil futures were down about 1% amid concerns over Middle East conflicts disrupting oil supplies. Gold futures, however, were up about 0.5% to around $2,660 an ounce, and bitcoin gained more than 2% to around $61,200. These movements reflect the ongoing volatility in commodity markets.
Broader Market Context
The U.S. stock market has been on a remarkable run, with the S&P 500 surging 20% above Wall Street's expectations for 2024. This rally has been fueled by the Federal Reserve's easing of interest rates, substantial corporate profits, and the absence of clear signs of an economic downturn. However, this optimism is tempered by historical patterns that suggest significant market rallies often precede substantial downturns.
The surge in artificial intelligence (AI) has also played a significant role in boosting stock prices, particularly for companies like Nvidia ($NVDA), which has seen its shares rise by 145% through September. Utility companies, such as Vistra and Constellation Energy, have also benefited from the increased demand for electricity to power AI infrastructure, with Vistra's stock skyrocketing by 208% and Constellation Energy's by 122%.
Investor Sentiment and Risk Appetite
Investor sentiment remains cautious, with the S&P Global's Investment Manager Index survey showing a risk-averse mood for the fourth straight month. Although overall risk sentiment has improved from September's 16-month low, the Risk Appetite Index remained in negative territory in October, at -10%.
Global Economic Insights
Global venture capital funding rounds decreased in both deal value and volume in the third quarter, with deal value amounting to $61.32 billion, down 7.8% from the same period in 2023. This decline reflects broader economic uncertainties and risk aversion among investors.
Conclusion
The stock market on October 11, 2024, was marked by caution and mixed signals. While the banking sector showed strength, tech stocks and broader market indexes retreated due to higher-than-expected inflation and jobless claims. As investors navigate these complexities, they are keenly watching economic indicators and Fed signals, aware that the current market rally, though robust, may not be sustainable indefinitely.
In this dynamic environment, investors must remain vigilant, balancing optimism with caution. The interplay between economic data, Fed actions, and geopolitical tensions will continue to shape market sentiment and direction. As we move forward, one thing is clear: the stock market's path ahead will be influenced by a multitude of factors, each requiring careful consideration and analysis.
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