Every Day the Market Overreacts: Capitalize on That

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Here’s your Morning Market Preview for September 23th, 2024
Read, or listen relaxingly for a few minutes – whichever you prefer!

Key Economic Reports

• At 9:45 am US Services PMI and US Manufacturing PMI report, monthly reports that give insight into service and manufacturing activity.

Key  Earnings Reports & Events Today

• AAR Corp, Red Cat Holdings, and Phoenix Motors have their earnings calls today.
  
  
• Boeing’s strike continues, and the company has furloughed thousands of workers. Mechanics are saying they are ready for a long strike. The strike began on September 13th.

The Fed

• The Atlanta, Chicago, and Minneapolis Fed Presidents speak today, giving insight into the last Fed rate cut and possible insight moving forward for Mr Market.

Stocks

Year-to-Date Performance:

• Up Most: Tech is now up 27.44% this year. Utilities is second-best on the year, up 25.61%.
  
  
• Down Most: Important to know, no sectors are negative on the year. The smallest gain has been in Energy, up 5.69% this year. Second-to-last is Materials, up 9.59%.

5 Day Moving Average: 

• Up Most: 86% of Energy Large Cap stocks are now above their 5 day average. Tech is second now with 76% of its Large Caps above their 5 day average.
  
  

• Down Most: Real Estate is down, and only 26% of Large Caps are above their 5 day average. Next closest is Health Care with 32% of Large Caps above their 5 day average. 

Crypto

• Bitcoin: Up big recently, now over $63,000, which puts it at a staggering 52% gain on the year.
  
  
• Ethereum: It’s been a good couple of days for Ethereum again, and is nearly $2,600 now, which means a 12.5% gain on the year.
  
  
• Top Gainers Recently: Bitcoin and Litecoin have performed well recently, up about 2.2 to 3.3% in the last day.
  
  
• Important to note: Crypto markets are always open and prices change constantly.

Bonds

• 2-Year Treasury:  Yields continue to come down, now at 3.597%.
  
  
• 10-Year Treasury: Up a tick to 3.741%, but overall it’s had a decline this year too.
  
  
• The yield curve is no longer inverted, having un-inverted in late August, 2024.

Gold

• Price: Gold has had a great year, now over $2,600 per ounce, and up 27% on the year.

Real Estate

• 30-Year Fixed Mortgage Rate: Up just a bit, now to 6.15%. The mortgage rate has dropped about 7.8% this year.

Geopolitical Aspects

• Europe: Continued recovery with a focus on green energy, impacting commodity markets.
  
  
• Asia: Economic rebound in China post-COVID, influencing global manufacturing and tech sectors.
  
  
• Global Tensions: Ongoing trade negotiations and regional conflicts could sway investor sentiment, particularly affecting oil prices and defense stocks.

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P.S.

Continue reading, if you would enjoy some simple explanations of key concepts to level up your financial education

Each of these elements interacts, creating the dynamic we call 'the market'.

Understanding these aspects of the investing arena can help investors in making informed investment decisions.

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    We’re the Guide.

• PMI (Purchasing Managers' Index): This is like a health check for businesses. A number above 50 means more growth, below 50 indicates contraction. It's crucial because it shows if companies are buying more stuff, which suggests they're confident about future sales.
• Economic Reports: Data like jobless claims help predict economic health. For instance, rising claims might suggest economic slowdown.
• Jobless Claims: These are weekly reports that show the number of people filing for unemployment benefits. Higher numbers can indicate a weakening labor market.
• Housing Starts: This measures the number of new residential construction projects and is a key indicator of real estate market health.
• The University of Michigan's Consumer Sentiment Index measures consumer confidence through surveys, reflecting optimism or pessimism about personal finances and business conditions.
• Federal Reserve Rate Decisions: The Fed adjusts interest rates to either stimulate the economy (by lowering rates) or control inflation (by raising rates). Rate cuts can make borrowing cheaper, while rate hikes aim to curb inflation.
• Treasury Yields: The return on U.S. government bonds, often used as a measure of investor sentiment about future inflation and economic growth.
• Stock Sectors: Different sectors thrive in different economic conditions. Tech might boom during innovation, while energy could struggle with green shifts.
• Bonds and Yields: Bonds are safer than stocks but yield reflects risk or inflation expectations. Higher yields could mean investors demand more return.
• Cryptocurrency: Digital currencies like Bitcoin and Ethereum have been volatile but offer significant returns in 2024.
• Gold: A traditional safe-haven investment that often rises during times of uncertainty or when inflation is high.
• Real Estate: Influenced by rates, economic health, and demographic trends. Lower rates can inflate home prices due to increased buying power.
• Mortgage Rates: Higher rates make borrowing more expensive, which can cool down housing demand and affect real estate prices.‍
• 1 Basis Point (BPS) equals 0.01%. It’s easier to say “5 bips” than it is to say “zero point zero five percent.”

‍Market Recovery: The Bounce Back

The week began with a recovery from a previous drop, where the S&P 500 saw a significant rebound, up by over 6.5% from its August lows. This recovery was led by sectors that had previously taken the hardest hits, particularly technology. The Nasdaq, home to many tech giants, surged over 8%, showcasing the market's resilience and optimism.

Inflation: The Cooler Cousin

Inflation, which had been the party pooper for a while, seemed to have taken a chill pill. Recent data indicated a cooling off, with numbers coming in lower than expected. This was good news for everyone, suggesting that the Federal Reserve might not need to keep interest rates as high, potentially leading to rate cuts sooner rather than later.

The Fed's Next Move: A Crystal Ball Moment

The market's mood was heavily influenced by the anticipation of the Federal Reserve's actions. With inflation showing signs of easing and employment data suggesting a softening labor market, the consensus was leaning towards the Fed beginning to cut rates possibly as early as September. This expectation was a significant driver behind the market's positive momentum.

Sector Spotlight: Tech Leads the Charge

While the market saw broad gains, technology stocks were the stars of the show. They not only recovered but led the market's upward trajectory, indicating a strong vote of confidence in growth-oriented investments.

Economic Indicators: The Good, The Bad, and The Ugly

• Employment: A slight uptick in unemployment hinted at a cooling labor market, which might give the Fed more room to maneuver on rates.
• Retail Sales: Up by 1%, suggesting consumer spending was still robust, despite inflation pressures.
• Gold and Crypto: Both saw gains, with gold shining as a safe haven and crypto riding the wave of optimism

Looking Forward: Diversification is the New Black

The theme for the next phase might be diversification. After a period where tech giants dominated, there's a shift towards a more balanced market where both growth and value stocks could perform well.

Conclusion

Last week's market movements were a blend of recovery, anticipation, and economic data that painted a cautiously optimistic picture. For the average person, this means your investments might have had a good week, but remember, the market's dance card is always full of surprises. Keep an eye on the Fed's decisions, as they could set the tone for the next big moves in the market.

Built for The One in the Arena

Arena Investor is on a mission not only to help with financial planning, and investment management, but also with education. Keep reading, watching, following, and sharing great Arena Investor content. And as always if you want professional advice, we are glad to be your teammate – along a financial journey you can actually enjoy.

You’re the Hero.
    We’re the Guide.

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‍US Economic Reports Today's economic calendar is packed with key indicators:

• GDP (Second Estimate for Q2): Expected to hold steady at 2.8%, signaling continued economic growth but with a watchful eye on inflation.
• Initial Jobless Claims: Anticipated at 232k, this could influence views on labor market health and Fed's future rate decisions.
• Pending Home Sales Index: At 10 AM, this report will offer insights into future real estate trends, crucial for understanding consumer confidence and housing market dynamics.

‍Key Earnings Reports Today

• NVIDIA (NVDA): After a stellar year, NVIDIA's recent earnings disappointed, leading to a -1.8% drop, which might affect tech sector sentiment today.
• Salesforce (CRM): Positive earnings have boosted Dow futures, suggesting a positive start for tech stocks.
• Dollar General (DG): Scheduled before market open, could provide insights into consumer spending habits.
• Best Buy (BBY): Also reporting pre-market, its performance will be watched for retail sector health.
• Campbell Soup (CPB): Expected to report, offering a view into consumer staples amidst inflation.

Federal Reserve (The Fed)

• While no meeting today, comments from Atlanta Fed President Raphael Bostic could sway market expectations on future rate decisions. Markets are pricing in rate cuts, especially if unemployment shows signs of increase.

Stocks

• US Stock Indexes: Pre-market trading suggests gains, with tech earnings like Salesforce providing a lift, though tempered by NVIDIA's dip.
• Individual Stocks: Focus on mega-caps like Apple, Amazon, and Google, which often set market sentiment.

Bonds

• Treasury Yields: Remain steady, reflecting a balance between economic recovery and inflation concerns.

Crypto

• Cryptocurrencies like Bitcoin and Ethereum remain volatile, influenced by regulatory news and broader market sentiment. No specific crypto news today, but always watch for reactions to global financial policies.

Gold

• Gold prices are slightly up, seen as a safe haven during economic uncertainty or inflation fears.

Real Estate

• The Pending Home Sales Index will be crucial. A drop could signal cooling in the market, affecting related stocks and funds.

Geopolitical Aspects

• US-China Relations: Developments from recent talks could impact markets, especially tech stocks due to ongoing trade tensions.
• Global Tensions: Any escalation or de-escalation in global hotspots could affect oil prices, thereby influencing energy stocks and commodities.

Worldwide Market News

• Europe: Watch for Brexit-related updates or EU economic data influencing European stocks or the Euro.
• Asia: After Japan's policy shift, Asian markets might react to further comments or data, affecting carry trade dynamics.
• Oil Markets: With WTI and Brent crude prices moving, geopolitical news or OPEC decisions could lead to volatility.

Learning Perspective for someone new to market analysis:

• Economic Reports like GDP and jobless claims gauge economic health, influencing everything from Fed decisions to stock prices.
• Earnings Reports are company performance reviews. Positive earnings can boost stock prices, while misses can lead to drops.
• The Fed controls interest rates, affecting borrowing costs, consumer spending, and asset prices.
• Stocks, Bonds, and Gold often move in response to economic indicators and Fed actions. Stocks might rise with good economic news but fall with inflation fears. Bonds and gold can be safer during uncertainty.
• Crypto and Real Estate are more speculative but influenced by broader economic trends.
• Geopolitics can create sudden market shifts, especially in commodities like oil or currencies.

Today's market will likely be driven by how these various elements interact. For instance, if GDP growth is higher than expected but jobless claims rise, markets might see mixed signals on economic health versus labor market strength, potentially leading to volatility as investors recalibrate expectations for Fed actions and economic recovery.

Built for The One in the Arena

Arena Investor is on a mission not only to help with financial planning, and investment management, but also with education. Keep reading, watching, following, and sharing great Arena Investor content. And as always if you want professional advice, we are glad to be your teammate – along a financial journey you can actually enjoy.

You’re the Hero.
    We’re the Guide.

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