Stocks Look Up, Consumers Feel Down

Last Week

The market shrugged off earlier losses to end the week on a positive note. The S&P was up 1.2%, and the Nasdaq was up 0.6%. Beneath the headlines, the broader market was more mixed, with advancing and declining issues roughly evenly matched despite gains in the major indexes. Small-caps, perceived as more interest-rate sensitive, sank 0.9%.

The 10Y ended the week at 5.24% after briefly reaching 5.36%, the highest level since 2002. Ongoing tensions in the Middle East kept oil prices elevated. “Don’t Let Me Down” remains the tune for lower-income Americans, as consumer sentiment slipped for a third consecutive month in early October, falling to 46.3 from 48.1 in September, as rising living costs and concerns about the economy continued to weigh on households.

September FOMC meeting minutes turned out to be a “snooze.” Instead, the Skydance-Paramount merger preoccupied the headlines. The deal closed after 13 months of review by American and European regulators.

AI and chip-stock hype is still driving the narrative. A single report speculating on the magnitude of OpenAI’s revenue growth led to a noticeable but short-lived sell-off in Nvidia, Oracle, and AMD shares.

SpaceX’s aggressive expansion into the wireless market through its agreement to acquire Grain Management’s nationwide spectrum portfolio for Starlink weighed on telecom stocks as investors assessed the threat of increased competition.

On the Chicago Sports Scene, the week was action-packed and emotional. The Blackhawks defeated the St. Louis Blues 4-2 in the home opener, but the Cleveland Guardians eliminated the White Sox in the MLB playoffs. Friday was somber upon news of Mike Ditka’s passing. The former Bears coach and Hall of Fame tight end passed away at 86. The Bears were trounced 31-7 in a road game versus Green Bay.

This Week

The bond market will be closed on Monday in observance of Indigenous Peoples Day.  Keen eyes will turn to Wednesday’s September CPI, expected to come in at +3.6% y/y, with core inflation rising 2.5%. Thursday comes with data on retail sales; economists forecast +0.3% m/m, sharply down from +1.1% in August. Any deviation in these readings will give pause (or fervor) to Fed officials who have indicated another rate hike this year.

Investors’ attention will be affixed to corporate earnings, with S&P 500 third-quarter growth estimates of 29.6%, and all 11 sectors expected to show y/y earnings and revenue growth. Banks are up first, with results from Citigroup, JPMorgan Chase, Goldman Sachs, and Wells Fargo expected on Tuesday, and Bank of America and Morgan Stanley on Wednesday. On deck are Charles Schwab and Interactive Brokers Group. Johnson & Johnson and UnitedHealth Group are in the hole.

The stocks mentioned above may be holdings in our mutual funds. For more information, please visit www.nsinvest.com.