Market Summary
Equities advanced towards new record highs as expectations for Fed policy easing remained intact throughout the week, reinforcing broader confidence ahead of the upcoming third quarter earnings season.
The economic calendar for the week was sparse as the government shutdown delayed the release of key reports – notably September’s Employment Situation Report, which would have been released on Friday.
Still, a handful of data related to the labor market shared mixed results with enough strength to support rate cut expectations. Job Openings (JOLTS) for August increased by 19,000 in August, in line with market expectations. The ADP Employment Change for September reported a -32,000 cut in private sector jobs, following the revised -3,000 loss in August.
The takeaway is that the labor market has shown continued signs of softening – conducive to rate cut optimism – but still resilient enough to stave off slowdown concerns.
U.S. Job Openings – August +19,000
Investors also saw some economic data in the form of the ISM Manufacturing and Services Indices. The Manufacturing activity rose to 49.1 in September, slightly above expectations of 49 but remains in a state of contraction (below 50) as tariff uncertainty continues to pressure new order activity – particularly within machinery, metals, and semiconductors. Business activity within the services sector dropped to 50 in September from 52 in August, and below expectations of 51.7. The decline added an element of stagflation with the largest sector of the economy experiencing slowing growth, higher inflation, and moderating employment.
U.S. ISM Manufacturing PMI – September 49.1
U.S. ISM Services PMI – September 50
Market concentration continues to be a central theme with each minor pullback experiencing near immediate buying interest. Mega-cap tech continued to show strength, particularly within chipmakers, with Nvidia (NVDA) finding new record highs.
Although a laggard for most of the year, the health care sector experienced sizeable gains during the week; This followed the announcement of TrumpRx – President Trump’s new direct-to-consumer prescription initiative with Pfizer (PFE) to reduce drug costs.
Week Ahead
This week, the government shutdown will continue to delay economic releases with most of the focus instead on Fed speakers, particularly Fed Chair Powell on Thursday, as he is scheduled to speak at a banking conference in Washington, D.C. On the economic front, investors will see the preliminary Michigan Consumer Sentiment report for October before third quarter earnings season begins with major banks the following week.
As always, if you have any questions or comments please do not hesitate to reach out.
Michael Neill, CFA
Chart Sources: TradingEconomics (US Census Bureau)
1Diffusion indexes that measure the economic health of their respective sectors by surveying purchasing managers about changes in key business activity variables, such as new orders, production, employment, and prices. A reading above 50 indicates expansion, while a reading below 50 signals contraction in that sector's economic activity compared to the prior month.