S&P 500 Nears 52-Week High Amid Rising Volatility and Yields

Stay Informed and Stay Ahead: Market Watch, October 9th, 2024.

Mid-Week Wall Street Markets

Key Takeaways

• Markets: DOW, S&P 500, and NASDAQ all rise. 9 of 11 sectors gain, Health Care leads, Utilities lags. Top industry: Industrial Conglomerates.
• Economics: The NFIB Small Business Optimism Index rose to 91.5 in September, remaining below its 50-year average. The Uncertainty Index hit a record high of 103. Meanwhile, wholesale inventories decreased by 0.1%, suggesting potential USD strength amid changing economic conditions.
• Yields & Commodities: US Treasuries’ yields rose across most maturities amid a selloff in longer-dated bonds. The 10-year yield increased to 4.075%, and the 30-year yield climbed to 4.343%, reflecting market concerns about inflation and expectations of continued Federal Reserve tightening. Commodities showed mixed results as energy and materials lagged due to falling oil prices. Crude oil futures dropped to $73.28, Bloomberg Commodity Index decreased by 0.72%, reflecting a broader weakness in the sector.
• Crypto & ETFs: Cryptocurrencies, trended downward, with Bitcoin trading at $60,838, down 0.24%, and Ethereum falling 1.55% to $2,401.94. This reflects ongoing volatility and uncertainty as investors reassess their positions amid recent fluctuations in cryptocurrency values. ETFs, notable gainers included the Defiance Daily Target 2X Long SMCI ETF, which rose 8.26% to $9.70 on significant volume of 3.0 million shares, likely driven by favorable semiconductor market conditions or news.
• Market Tips: Focus on long-duration bonds and consider leading mortgage refinancing companies as Q4 rate cuts continue. Stay long in Ai (read-up on our top CAGR’S report) diversify with Russell 2000 ETFs.

Market Summary?

Indices & Sectors Performance:

• DOW, S&P 500, and NASDAQ rise. 9 of 11 sectors gain, Health Care leads, Utilities lags. Industry Leaders: Industrial Conglomerates (+2.17%), Automobile Components (+2.11%0, and Office REITs (+1.83%).

Technical:

• The Dow Jones Industrial Average (DOWI) shows steady bullish momentum, trading above key moving averages with gains across all timeframes, from the 5-day (+0.75%) to the 200-day (+13.66%). Stochastic readings are elevated (20-day %K at 94.07%), suggesting overbought conditions but continued buying interest. The MACD is positive, especially over the 50-day (1,126.95), indicating strong upward momentum. While short-term consolidation is possible due to high Stochastic levels, the broader uptrend remains intact, supported by stable volatility and sustained market strength.

• The S&P 500 (SPX) shows strong bullish momentum, holding above key moving averages, with gains from the 5-day (+1.44%) to the 200-day (+22.02%) levels. High Stochastic readings (20-day %K at 98.18%) indicate overbought conditions but sustained buying pressure. Positive MACD readings, especially the 50-day (174.84), reflect solid upward momentum. While overbought signals suggest potential near-term consolidation, the broader uptrend remains intact, supported by manageable volatility and steady gains.

• The Nasdaq Composite (NASX) maintains strong upward momentum, trading well above key moving averages, with gains from the 5-day (+2.04%) to the 200-day (+22.24%) periods. Elevated Stochastic readings (20-day %K at 96.37%) reflect overbought conditions, but continued buying interest persists. The MACD, particularly the 50-day (617.29), indicates robust upward momentum. While the Relative Strength Index (RSI) shows a moderate position (20-day at 58.93%), suggesting the possibility of short-term consolidation, the overall uptrend remains strong, backed by healthy volatility and sustained price appreciation.

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Sectors:???????????

• Over the past 90 days, the S&P 500 has gained +3.93%, with notable strength in the Industrials (+12.50%) and Real Estate (+12.91%) sectors, indicating a focus on economic resilience and demand for real assets. The Financials sector also showed robust performance, rising +10.36%, while Technology (-1.16%) and Communication Services (-1.49%) faced challenges, suggesting a rotation out of high-growth sectors. Utilities (+14.79%) showed defensive strength amid market volatility. This trend reflects a market balancing growth optimism with defensive positioning.

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Economic Highlights:

• The NFIB Small Business Optimism Index rose 0.3 points in September to 91.5, marking the 33rd month below its 50-year average of 98. The Uncertainty Index increased 11 points to 103, a record high. Small business optimism remains subdued, while uncertainty grows, and capital spending and inventories decline.
• Wholesale inventories decreased slightly, with the latest figure at 0.1%, down from the forecasted 0.2%. Wholesale inventories reflect changes in goods held by wholesalers, influencing economic health. The lower-than-expected reading suggests potential USD strength, possibly indicating rising demand or improved supply chain efficiencies.

NASDAQ Global Market Update:

• NASDAQ saw 4.89B shares traded with a 1.03 advance/decline ratio. NVIDIA ^NVDA and ProShares UltraPro Short QQQ ^ SQQQ led share volume actives.

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US Treasuries & Bond Markets:

• US Treasuries: Yields rose across most maturities, reflecting a selloff in longer-dated bonds. The 10-year note yield increased by 5.8 basis points to 4.075%, while the 30-year bond yield climbed 4.7 basis points to 4.343%. Shorter-term yields also moved higher, with the 2-year note rising by 6.1 basis points to 4.028%. This broad rise in yields suggests market concerns about inflation persistence and expectations of continued Federal Reserve tightening, driving investors to demand higher returns for holding U.S. government debt.

• Global bonds: Yields showed mixed movements. The U.S. 10-year yield rose by 5.7 basis points to 4.074%, reflecting expectations of continued monetary tightening. Germany's 10-year yield increased by 1.3 basis points to 2.263%, while Japan's climbed 0.8 basis points to 0.934%. The U.K. 10-year yield dipped slightly by 0.3 basis points to 4.185%, and China's 10-year yield fell by 2.9 basis points to 2.184%, suggesting regional variations in inflation expectations and monetary policies. Overall, the rising U.S. yields indicate pressure on global borrowing costs.

Market Factors:

• Market Factors: Showed modest gains across the board. Mega Cap Growth and Large Cap Growth both rose by 0.3%, with year-to-date gains of 24.8% and 24.6%, respectively. Value stocks performed slightly better, with Mega Cap Value up 0.7% and Large Cap Value gaining 0.6%. Small Cap Growth and Value increased by 0.3% and 0.4%. Momentum stocks added 0.5%, leading with a 30.9% YTD gain, while IPOs rose 0.9%. High Dividend stocks climbed 0.7%, reflecting investor interest in income-generating assets.

Volatility:

• VIX at 20.86 (-2.61%) today; The VIX has been experiencing rising volatility ahead of Bank earnings later this week.

• The Fear & Greed Index registers “Greed", Volatility Index “Neutral”.

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Commodities & ETFs:

• Commodity markets: markets saw mixed results, with energy and materials lagging due to a pullback in oil prices. Crude oil futures fell to $73.28, down 0.39%. Gold futures declined by 0.35% to $2,626.10, while silver futures rose 0.41% to $30.725. The Bloomberg Commodity Index decreased by 0.72%, reflecting broader weakness in the sector.

• ETF volume gainers: Notable ETF gainers included the Defiance Daily Target 2X Long SMCI ETF, which saw a significant volume of 3.0 million shares traded, rising 8.26% to $9.70. Likely driven by favorable market conditions or news related to the semiconductor industry.

Cryptocurrency & Currency:

• Cryptocurrency: Most cryptocurrencies reflected downward trends, with Bitcoin Cash down 2.73% and Litecoin dropping 1.97%.Bitcoin, which traded at $60,838, down by $144 or 0.24%. Ethereum also experienced a decline, falling 1.55% to $2,401.94. Post-market settling indicates a continued reassessment of positions, highlighting potential volatility and uncertainty as investors navigate recent fluctuations in cryptocurrency values.

• Currencies: The Euro (EUR/USD) fell to 1.09, down 0.39%, and the U.K. Pound (GBP/USD) dropped 0.31% to 1.306, reflecting concerns over economic outlooks in Europe and the UK. Meanwhile, the Japanese Yen (USD/JPY) strengthened 0.77% to 149.34, driven by risk-off sentiment. The U.S. Dollar Index rose 0.37% to 102.92, indicating dollar strength amid market uncertainty. This mixed performance underscores ongoing volatility, with the dollar gaining against some currencies while others face downward pressures.

Stocks:

• Stock Advancers: Banzai International Inc. (BNZI) increased 81.88% to $5.02, with a volume of 37.0 million shares traded. Arcadium Lithium PLC (ALTM) gained 30.90% to $5.55, with a volume of 415.0 million. MicroCloud Hologram Inc. (HOLO) rose 26.88% to $6.57, with 38.2 million shares traded. This performance in these stocks shows increased investor interest, particularly in technology and lithium sectors.

?Notable Weekly Earnings:

• Royal Gold (RGLD), Victory Capital (VCTR), beat.
• PepsiCo (PEP), Aeon ADR (AONNY), miss.?

Global Markets Summary:

• Leader: Nikkei 225 (Japan), up 0.87% to 39,277.96, indicating strong market confidence. Loser: Shanghai Composite (China), down 6.62% to 3,258.86, reflecting serious concerns over economic growth. European markets are up, highlighting resilience amid notable declines in China and indicating ongoing volatility across regions.

Historical Patterns and Market Impact October ???

• October: Based on S&P 500 historical data sets, the forecast is set to decline -0.8%, reflecting typical election-related volatility. However, over the past decade, October has averaged a gain of 1.6%, with a return of 2.4% in the last five years. Overall, the last quarter of 2024 suggests a net positive performance from November through December, effectively offsetting October’s losses and positioning the market for a strong year-end finish.

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Strategic Investment Adjustments:

• Focus on long-duration bonds using leveraged ETFs like ZROZ (PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF) and EDV (Vanguard Extended Duration Treasury Index ETF) to capitalize on potential rate cuts. Nasdaq, tech, AI, and semiconductors show strong long-term potential. Diversify with Russell 2000 ETFs and bank index ETFs, as election years typically enhance market performance. Top Small-Cap ETFs to consider: Vanguard Small-Cap Growth ETF (VBK), iShares Russell 2000 Growth ETF (IWO), and iShares S&P Small-Cap 600 Growth ETF (IJT).

Strategic Investment Approaches

US Treasury Long Bond Opportunity

Small Cap Opportunities Fall 2024

Top 10 Fastest-Growing Technology Sectors Through 2028

In the NEWS

Central Banking, Monetary Policy & Economics:

• China’s Central Bank Launches Swap Facility to Boost Stock Market - WSJ
• ECB Rates Can Be Neutral in 2025 If Inflation at 2%, Kazaks Says - Bloomberg
• US CPI Data Will Likely Show Further Disinflation in September - Bloomberg

Business:

• Basic Materials Roundup: Market Talk - WSJ
• Seven & I Restructuring, Profit Outlook in Focus at Earnings - Bloomberg?

China:

• Explainer | What can we expect from the pair of 100 billion yuan investments China advanced? - SCMP