The Weekly Wire: Best Week of the Year

Last week marked the best performance of the year for 2024, with all five trading days finishing in positive territory. Technology stocks, which had lagged the previous week, rebounded sharply and led the market higher. The NASDAQ posted an impressive near 6% return, while the S&P 500 gained over 4%.

One notable example of this turnaround was Nvidia. The previous week, Nvidia experienced the largest weekly loss in stock market capitalization history. However, they quickly recovered those losses last week. Nvidia is no stranger to setting records in market cap changes, holding five of the top ten spots for one-day gains and eight of the top ten for one-day losses. Given this history, continued volatility should not come as a surprise.
Last week’s key economic release was the Consumer Price Index (CPI). Headline inflation now stands at 2.5% year-over-year, but beneath the surface, the story is more complex. When excluding energy and the often-volatile food prices, “core” inflation came in hotter than expected, with a year-over-year increase of 3.2%.

Additionally, the Fed’s closely watched “Supercore” category, which focuses on inflation in the service sector by excluding food, energy, other goods, and housing rents, rose to 4.5% year-over-year. This is higher than the 4.0% recorded in August 2023, signaling persistent inflationary pressures in key areas.

This week, we’ll get a clearer picture of consumer health with the latest Retail Sales data, along with new housing market figures due on Tuesday and Thursday. The highlight of the week, however, will be the Federal Reserve’s anticipated interest rate cut on Wednesday, which would be the first since early 2020. This current cycle marks the longest period the Fed has maintained rates at their peak before cutting.

As we approach the decision, the consensus is divided on whether the Fed will cut rates by 0.25% or 0.50%. The argument for a 0.25% cut is rooted in the persistence of core inflation (excluding food and energy), which remains stubbornly high. On the other hand, the case for a 0.50% cut comes from the weakening labor market. The trend in the unemployment rate moving higher this year is particularly concerning, as the pace of its rise has historically been a reliable indicator of an approaching recession. In summary, while unemployment remains low and both economic and earnings growth have shown resilience, the probability of a recession is increasing.

Add it all up...

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Key Data

Stocks, Bonds, Alternatives, and Real Assets as of September 13, 2024

Source: Morningstar

The TV Benchmark represents an average of the S&P 500, Dow Jones IA, and NASDAQ 100 return indexes. The Orion Risk Score represents risk relative to the global equity market.

Interest Rates as of September 13, 2024

Sources: Yahoo Finance, S&P Global, Crane Data, BankRate

Key Economic Data Last Week

Sources MarketWatch, First Trust

Key Economic Data This Week

Sources MarketWatch