Weekly Market Roundup
The biggest news of the week came Friday morning, when the September jobs report showed the U.S. economy added just 29,000 jobs, well short of the roughly 84,000 economists expected. Hiring for the prior two months was also revised down by a combined 60,000 jobs, the unemployment rate rose to 4.2%, and average hourly wages grew 3.0% from a year ago, the slowest pace since 2021. That softer picture quickly changed expectations for the Federal Reserve: futures markets went from pricing roughly a 70% chance of a rate hike at the Fed's October meeting a week ago to about 20% after the report, although investors still see about a two-in-three chance of a hike by December. Consumers are feeling the strain as well. The Conference Board's consumer confidence index fell 6.7 points to 81.9, its lowest reading since 2014 and its third straight monthly decline, with gas and oil prices cited as the top concern.
Despite the cooler jobs data, longer-term interest rates kept climbing. The 10-year Treasury yield briefly rose above 5.3% on Wednesday, its highest level since 2002, before closing the week at 5.28%, up 0.11 percentage points from the prior Friday. The 30-year yield finished at 5.63%, while the 2-year, which is more closely tied to near-term Fed expectations, was essentially unchanged at 4.83%. Part of the pressure came from inflation: the ISM manufacturing survey showed that the prices factories pay for materials jumped sharply, to 77.9 from 71.1 and well above expectations, a sign that cost pressures are still building. Oil was volatile, with Brent crude near $108 a barrel on Monday after President Trump rejected Iran's proposed seven-day plan to reopen the Strait of Hormuz, before easing back to around $100 later in the week as truce talks picked up. The Bloomberg US Aggregate bond index fell -0.60% on the week and is now down -2.86% year-to-date.
Stock market gains were narrow. The Nasdaq rose +0.46% and closed Friday at a record high, led by large technology names such as Nvidia (+4.2%) and Microsoft (+3.9%), while the S&P 500 slipped -0.25%, the Dow fell -0.23%, and the small-cap Russell 2000 dipped -0.11%. Company-specific news drove some of the biggest moves: Accenture jumped 22% on Thursday, its best day on record, after reporting a record $84.5 billion in annual bookings that eased worries about artificial intelligence disrupting the IT services industry, while credit-scoring company FICO fell 27% on Tuesday after the federal housing regulator put a competing credit score on equal footing for mortgages backed by Fannie Mae and Freddie Mac. International stocks lagged, with the MSCI ACWI Ex-USA index down -1.37% on the week (+14.16% year-to-date), and precious metals pulled back, with gold down about 3% and silver about 5%. Market volatility stayed contained, with the VIX closing the week at 15.31.
This week's calendar is lighter after a data-heavy stretch, but several releases bear directly on interest rates. Monday brings the ISM services survey and S&P Global's purchasing managers' index, a read on the service sector that makes up most of the U.S. economy. Tuesday brings the ADP private payrolls report, which will be watched for confirmation of Friday's weak hiring numbers. Wednesday is the key day: the Treasury sells new 10-year notes, and the Fed releases the minutes from its September meeting, which should show how seriously policymakers are weighing another rate increase. Thursday brings weekly jobless claims and a 30-year bond auction, and the week closes Friday with the University of Michigan's consumer sentiment survey. With demand for government debt under scrutiny after recent auctions, the 10- and 30-year sales are worth watching closely, and the September inflation report on October 14 looms just beyond this week.
Last week sent a mixed message. On one hand, the labor market is clearly cooling, consumers are feeling the squeeze from higher energy prices, and the odds of a near-term Fed rate hike fell sharply. On the other, long-term interest rates kept rising and manufacturers' input costs are still climbing, which suggests that inflation, not growth, remains the bond market's main concern. That combination of slowing growth alongside stubborn inflation pressure is a more difficult backdrop for both stocks and bonds than either one on its own.
We would also note how concentrated the stock market's gains have become. The Nasdaq reaching a record high while the broader S&P 500, the Dow, small caps, and international stocks all finished lower is a sign that a relatively small group of large technology companies is doing much of the work, while the average stock is struggling. Market breadth, a measure of how many stocks are participating in a rally, remains near its lows for the year. That kind of narrow leadership can persist for a while, but it leaves headline indices more exposed if sentiment toward those few companies shifts.
We remain diversified across market capitalizations, sectors, and geographies, with an emphasis on higher-quality companies that can hold up in an environment of elevated borrowing costs. As always, we believe a disciplined, long-term approach, rather than reacting to any single jobs report, data point, or week's headlines, is the best way to navigate a period like this one.
If you have any questions about the above, please reach out to us to set up a one-to-one meeting so we can review your situation.
Sincerely,
President
SBC Investment Management
P: (602) 641-5996 · M: (319) 520-2033 · E: bandrus@sbcinvestmentmanagement.com
Investment Analyst, Junior Portfolio Manager
SBC Investment Management
P: (435) 775-2950 · M: (435) 590-8317 · E: jrehkop@sbcinvestmentmanagement.com