Friday’s rally gained momentum toward the close on the back of a strong jobs report, leading the stock market higher this week. The S&P 500, Dow and Nasdaq narrowly overcame deep losses on Tuesday due to escalating tensions in the Middle East, which pushed up oil prices and the CBOE Volatility Index, commonly referred to as Wall Street’s fear gauge. A silver lining in all this uncertainty: The market has now broken out of its overbought condition and moved the S&P short-range oscillator to a more neutral position. If the situation turns oversold, we are prepared. With the exception of some small purchases, we followed our discipline mandate and reduced our equity exposure during the recent overbought session. This increased our cash position to approximately 9.4% of our portfolio, which consisted solely of equities. The government’s September jobs report, released on Friday morning, turned out to be the big market event we had been expecting. The U.S. economy added 254,000 nonfarm jobs last month, beating expectations of 150,000. The country’s unemployment rate fell to 4.1%. Economists had expected the rate to remain unchanged at 4.2%. Hourly wages rose 4% year-on-year, exceeding expectations for a 3.8% increase and accelerating from August’s 3.9% increase. Jim Cramer called Friday’s jobs report a “no-landing number,” saying that curbing inflation and resiliency in the labor market meet both of the Fed’s dual mandates, preventing a soft economic landing or recession. This means that it should result in a maintenance of the status quo rather than a hard landing. . The market is currently expecting a major rate cut of 50 basis points (bp) in September, followed by a 25 basis point (bp) rate cut at the FOMC in November and December. This would mean a rate cut of 100 basis points (1 percentage point) by the end of the year. Lower short-term policy rates usually result in cheaper mortgages. But the long end of the bond market yield curve remains stubbornly high, as evidenced by the rise in the 10-year Treasury yield on Friday’s jobs report. Mortgage rates generally last 10 years, with 30-year fixed rates rising to 6.53% Friday morning, according to Mortgage News Daily. Matthew Graham, chief operating officer of Mortgage News Daily, said: “The only saving grace is that this is only a portion of the recent jobs report, which has been mostly weak, so the next jobs report will likely be fixed income.” The idea is that it won’t have that much of a negative impact.” he told CNBC. The S&P 500 Energy Sector Index posted its biggest gain this week, rising more than 6.5% as oil prices rose on Tuesday’s Iranian missile attack on Israel and subsequent concerns about Israel’s plans for retaliation. President Joe Biden on Friday discouraged Israel from attacking Iran’s oil infrastructure. Other factors could also impact oil prices in the coming days and weeks, including China’s economic stimulus, OPEC+ production curbs and the end of the three-day US port strike. Telecommunications services led this week’s sector gains, followed by utilities. Meanwhile, materials led to declines, followed by real estate and consumer staples. Over the next week, banks will begin their third-quarter earnings season, the government will release two major inflation reports, and Advanced Micro Devices will hold a major artificial intelligence event. Inflation data: September consumer price index (CPI) report will be released on Thursday. Economists forecast a 2.2% year-on-year increase in headline prices, excluding volatile food and energy prices, and a 3.1% increase in core prices. In addition to the headline and core numbers, we will also continue to focus on the CPI haven index, which is a key basis for overall inflation. A further slowdown in year-on-year increases in shelter prices would be welcome. The Producer Price Index (PPI) for September will be released on Friday. Although the Fed is more concerned about consumer prices, PPI remains important because a higher-than-expected rise in wholesale prices could mean higher retail prices in the future as companies look to protect margins. It is. These inflation numbers will certainly be factored into the Fed’s calculations for future rate cuts. Bank earnings: Wells Fargo is scheduled to report before the opening bell on Friday. Jim said last week that he likes Wells Fargo “very, very much” and thinks it should be on investors’ buy lists. In addition to the reported quarterly results, I’d be interested to hear the bank’s thoughts on the future of its business now that interest rates are lower. Lower interest rates are expected to benefit Wells Fargo’s corporate and investment banking division. We will also listen to updates on the asset caps imposed by the Fed after an independent review of risk and controls was submitted to central bankers last week. We don’t expect the cap to be lifted by 2025, but just knowing the timing, whether it’s in the first half or the second half, can help Wall Street analysts refine their earnings forecasts for next year. Probably. I’m less certain about Morgan Stanley, another bank stock that will report results on October 16th. Bank stocks were solid on Friday. Latest on AI: Advanced Micro Devices will host an Advancing AI event on Thursday. Jim said last week that investors who don’t own AMD stock should buy the stock ahead of CEO Lisa Su’s presentation. Jim believes Sue can tell a much better artificial intelligence story than people think, pointing to AMD’s high-quality AI chips for data centers and personal computers. Given the stock’s relatively poor performance year-to-date, it will be interesting to see if the AMD event acts as a catalyst for a comeback trade. AMD’s stock is up nearly 16% in 2024, compared to its closest rival Nvidia’s stock, which is up 152%, and the SOXX Semiconductor ETF, which is up more than 20%. One Week Ahead Tuesday, Oct. 8 Pre-earnings: PepsiCo (PEP) Thursday, Oct. 10 Pre-earnings: Delta Air Lines (DAL), Domino’s Pizza (DPZ) 8:30 a.m. ET: First Unemployment Claims Count 8:30am ET: Consumer Price Index 12:00pm ET: AMD’s Evolving AI Friday, October 11th 8:30am ET: Producer Price Index Before the Bell: Wells Fargo (WFC), JP Morgan (JPM), BlackRock (BLK) (Learn more here) Full list of Jim Cramer’s Charitable Trust stocks. ) As a subscriber to Jim Cramer’s CNBC Investing Club, you will receive trade alerts before Jim Cramer makes a trade. After Jim sends a trade alert, he waits 45 minutes before buying or selling stocks in his charitable trust’s portfolio. If Jim talks about a stock on CNBC TV, he will issue a trade alert and then wait 72 hours before executing the trade. The above investment club information is subject to our Terms of Use and Privacy Policy, along with our disclaimer. No fiduciary duties or obligations exist or arise from your receipt of information provided in connection with the Investment Club. No specific results or benefits are guaranteed.
Traders work on the floor of the New York Stock Exchange during afternoon trading on October 3, 2024 in New York City.
Michael M. Santiago | Getty Images
Friday’s rally gained momentum toward the close on the back of a strong jobs report, leading the stock market higher this week. The S&P 500, Dow and Nasdaq narrowly overcame deep losses on Tuesday due to escalating tensions in the Middle East, which pushed up oil prices and the CBOE Volatility Index, commonly referred to as Wall Street’s fear gauge.
