The Buzz on Business for September 9th, 2024

A bad, bad day on Friday put the bow on a bad, bad week for stocks. Again, fears of economic weakness in the face of some disappointing economic and labor market data gets the blame. And, again, we just do not see it. We’ll get into the numbers in just a minute, but they were mixed at worst. And the fact that the labor market is weakening is just not news!

The irony is that just a few months ago, weak economic data would have sent stocks skyward. So, what’s going on now? Why the change?

Well, first, while the Federal Reserve has yet to cut the Fed Funds rate, interest rates have already fallen dramatically. The 2-year treasury peaked in late April above 5.0%. It now stands at 3.6%. Rates have been in a more or less steady decline since May. A change from the Fed is coming but we would not be surprised if longer term rates rose in response.

And late last year and early this year, the labor market seemed to be in danger of overheating. Employers were struggling to fill positions and wages were climbing. There was a genuine, well-founded fear that inflation might reignite and that interest rates might be going up! That fear is no longer front of mind.

Finally, stocks have come a long way. On May 1^st, the S&P 500 stood at about 5,000. In October of last year, it was struggling to stay above 4,000. A week ago, it was over 5,600. These are extraordinary gains that can’t be justified on the basis of interest rate cuts, prospective or actual, alone.

At this point in the cycle, rapidly growing earnings will also be needed. And while earnings have been good, a weakening economy, if that’s what we are seeing, jeopardizes those potential future earnings.

Stock Market Report

Stocks sold off and sold off sharply, across the board, on Friday, to finish off the worst week of 2024. Volume was strong and declining stocks beat advancers by almost three to one.

• The Dow Jones Industrials was down over 1.0% and it was the best performing index of the day. It closed at 40,345, off 410 points.
• The S&P 500 was down over 1.7%, that’s 95 points, and it closed at 5,408.
• The techs had the worst of it. The NASDAQ Composite got hammered. It was down 2.6% and closed at 16,691, for a 437-point loss.
• And the Russell 2000 gave up 1.9% and closed at 2,091 down 41 points.

Bond Market Report

Rates were down, bonds up, pretty much across the board on Friday.

• The yield on the 2-year treasury was down almost ten basis points and it closed at 3.650%.
• The 20-year bounced around a fair amount before settling at 4.096%, down 1 tick.

Oil, Gold, and Bitcoin

• Oil sold off sharply again. It was off another $1.48, and a barrel now changes hands at $67.67.
• Gold sold off, despite the falling interest rates. It was down $19.80, and a troy ounce will now set you back $2,525.40.
• And Bitcoin had a bad day and a bad week and appears to us to have fallen through support. It was down $3,005.57 and at 4:00 PM ET Friday stood at $53,570.52

Mixed Data is Mostly Good. Busy Week on Tap

So, what is up with all this bad labor market news?

Well, we think the data wasn’t half bad.

• Average Hourly Earnings grew at an almost 5% annual rate in August. Given that inflation has been running at less than 3.0%, that’s not too bad. Pretty good, actually,
• The Labor Force Participation Rate held steady at 62.7%. Our favorite economic statistic remains too low, but it has been trending up in recent months and isn’t moving in the wrong direction.
• And the Unemployment Rate fell last month. It came in at an as expected 4.2%, down from last month’s 4.3.

So, you may be asking, where’s the bad news.

• Well, the economy created just 142,000 new jobs last month, well below expectations but, it must be said, well above last month’s 89,000.
• And 15 of the last 21 jobs reports were revised and revised downward on Friday. These kind of downward revisions seem to be a continuing problem at the Labor Department and the Bureau of Labor Statistics. Perhaps some folks there ought to join the ranks of the unemployed.

We’ve got a busy week on the economic calendar this week. The high point is the inflation data due out on Wednesday and Thursday. Everyone here at the Ministry of Truth will be reading, watching and listening so we can analyze and report all of it to you. All you’ve got to do is keep it right here on the Buzz.