Stocks Start The Week On A Solid Note, New All-Time Highs By The Nasdaq
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Follow-through buying from last week's better than expected inflation reports and bullishly received jobs report sent prices higher.
As I mentioned yesterday, last week's Personal Consumption Expenditures (PCE) index (which is the Fed's preferred inflation gauge) showed headline inflation at 3.4% y/y, which was in line with last month's downwardly revised 3.4% (from 3.7%), and below estimates for 3.7%, while the core rate (ex-food & energy), was at 3.0% vs. last month's downwardly revised 3.0% (from 3.3%), and the consensus for 3.3%.
So while the Fed raised rates last month, in part, because they were worried about inflation going up (which was also being exacerbated by rising oil prices), inflation is not rising as feared. It's actually starting to fall, showing that structural inflation is easing. And that's lowering expectations for another rate hike.
As for last week's jobs report, the headline number showed 29,000 jobs were created for the month of September (46,000 in the private sector and -17,000 in the public sector), vs. the consensus for 85,000.
So it was a weaker-than-expected reading. But it was cheered because that too helped dampen expectations for a rate hike later this month.
But make no mistake, it was a fine report. Not too hot and not too cold. While public sector jobs contracted by another -17,000 (continuing the shrinking of the Federal workforce, which is down by roughly -10% over the last 2 years), the private sector grew by 46,000 jobs.
And that was more than enough to meet and exceed the estimated 15,000 jobs needed per month, to maintain full employment at these levels.
Crude oil was also down yesterday. Oil has been playing a factor in inflation concerns. But crude oil has been falling over the last several days. Especially after reports last week that Middle East crude exports rose to 16.3M barrels per day, which is the highest since the war began. That's approximately 80% of pre-war levels. To be clear, Hormuz volume is only at 40% of pre-war levels. And that's with Iran exports effectively at zero. But other Middle East routes used by Saudia Arabia, the UAE and Oman, to name a few, have increased significantly, putting combined shipments at just 20% below the pre-war baseline.
Additionally, it was announced on Friday that G7 member countries would be releasing as much as 100 million barrels of diesel fuel and crude oil over the course of four months. They also noted that a "substantial" amount of diesel would be released within the first 20 days. And that's great news given the price of diesel has risen by 70% since February.
So all of the above should help cap oil prices. Ease inflation. And help put a lid on rates.
And stocks were up accordingly.
And, of course, the historically best quarter of the year (Q4) is upon us (since 1950, the S&P has gone up 79% of the time, with an average gain of 4.1%), along with another earnings season right around the corner (stocks typically go up during earnings season), and those also bode well for stocks.
So there's plenty to look forward to as we head into the end of the year.
See you tomorrow,

, Zacks Investment Research
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