Jay Woods:
Good morning. I'm Jay Woods, chief global strategist at Freedom Capital Markets, and long-term member of the New York Stock Exchange. This week I have the honor to fill in for Michael Reinking. You are listening to Market Storylines on the inside the Icehouse Podcast feed. A big thanks to everyone for tuning in.
Now, as we record this on Thursday afternoon, let's get to this week's market storylines. This week has been all about the Fed. As you recall, a week ago we got that big and somewhat surprising announcement of a 50 basis point cut. It took about a half a day for the market to digest that, but ever since the Friday, the first full day of trading since that cut, the market has been slowly and steadily trending higher. As we tape, the S&P is trading at all-time new highs. This week has been all about Fed speak. We're going to get some more Fed speak as we head into next week, and right now the Fed has acted like they're on the same page despite one dissension. The first dissension from a Fed governor since 2005, where Michelle Bauman, Fed governor, decided I think 25 basis points was enough. That seemed to be the consensus on the street, but the market has taken this 50 basis point cut in stride, and now we're looking for a potential 25 basis point cut at the next meeting in November, and another 25 basis points in December.
But before we get to those cuts, there's a lot for this market to digest. First things first, next Tuesday begins quarter four. Fourth quarter, traditionally the strongest quarter of the year. Let's see if those trends can continue. One trend we did break was September. September, if things hold, we still have two days to go, so hold on tight. We'll be the first up September since 2019. And that brings us to our fun stat of the week thanks to my friend at Carson Group, Ryan Dietrich.
When September makes an all time new high like we did this past year, the fourth quarter does even better. According to Ryan's metrics, and I back them up, I looked this up myself, the S&P 500 is up 19 out of 21 times when we make a new high in September. The average gain is 5%.
What about an election year you ask. That's a great question. In an election year, that stat is six for six, up an average of 6%. So if we are to just stay average, based on these statistics going into a fourth quarter, with all time highs in September, as we tape this, another all time high, we're looking for S&P 6000-6100. Let's hope these statistics ring true.
Speaking of the fourth quarter, let's look back on how we did in the third quarter. I like to look back every so often to see where the leadership is. Last year, 2023, everyone talked about seven stocks taking this market higher. Well, this year the story has been broadening out, and the third quarter was the poster child for that broadening rally. What were the three leading sectors going into the last few days of September? Real estate, utilities, industrials. What were the lagging sectors while energy is lagged as the price of crude has calmed down, but technology is flat for the month. This is the big story as we head into Q4, because if technology was to pick up, guess what? It's going to take the market higher. So look for technology stocks to get a little bit of a rebound, and given their weighting in the major indices, technology trading higher it could be the tail when this market needs as we head into the end of 2024.
Now let's focus a little more on what we're watching next week. [inaudible 00:03:41] a slew of earnings, we'll touch on that in a second, but economic calendar is fairly busy. On Tuesday we get ISM manufacturing and construction spending numbers at 10 AM. On Wednesday, we get the ADP employment number at 8:15. Thursday, the all important weekly jobless claims at 8:30, as well as ISM services and factory orders. And Friday, Friday's the one number the traders at the New York Stock Exchange will be watching the most. That is the US unemployment report for the month of September. As of now, that unemployment rate is supposed to remain steady at 4.2%. Hourly wages year over year look to come in at 3.8%. Why is this number important? It's the number the Fed has been focused on as they look at their dual mandate. Inflationary numbers have continued to cool. Now that unemployment number. The reason for the 50 basis point cut was they were concerned about unemployment rising. So if it holds steady, it's a little too early to say if those rate cuts are having any impact, but it will be the focus of traders and investors as we go forward.
As far as earnings go, we're not in earnings season just yet, but we have two in particular stocks to trade here at to New York Stock Exchange that I think investors need to keep a keen eye on. One is Nike.
Nike's traded lower seven of the last nine reports, lower by 19% year to date, but there's a big change at Nike. They announced a new CEO, so John Donahoe will be stepping down, replaced by longtime lifer Elliot Hill. So we'll see what they say as far as the transition goes and what this means for the iconic sneaker brand.
And then here's one you're not going to hear anywhere else. Lam Wesson, the maker of the famed french fry. You probably had them when you've gone into your local McDonald's. The largest french fry maker, their shares are lower 38% year to date after back-to-back quarters of disappointing results. Dare I say, soggy results. Shares dropped by 19% and 28% over the last two quarters. They're looking for a rebound. Shares at McDonald's are trading at all time highs. Hopefully Lam Wesson gets a little rebound this quarter as well.
So outside of those two earnings things should be slow. We're going to continue to focus on Fed speak, manufacturing numbers, jobless claims. Then we're going to be focused on election headlines. Election headlines will be moving the market, but the market continues to trend higher as we head into that historically strong fourth quarter.
So I just want to say thank you very much for spending some time with us today. Remember to tune in every Friday to Market Storylines on the inside the Ice House Podcast feed, and be sure to rate, review, and subscribe wherever you get to your podcast. Be sure to retweet this and share this with your friends. I thank you for listening. I'm Jay Woods. We'll talk to you again next week.
Speaker 2:
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