U.S. and World Markets Extend September Gains Thanks to Shifting Interest Rate Outlook

Alexander Garcia
26 Sep, 2024
Miami

Benchmark indexes extended their two-week run amid positive market sentiment following better-than-expected economic data. 

The S&P 500 index traded at a new intraday high, and the Nasdaq Composite approached its record high reached in July. 

Market sentiment improved after the latest weekly jobless claims, durable goods orders, and GDP growth revisions met investor expectations. 

Initial weekly jobless claims decreased 4,000 to 218,000 at the end of the last week, the U.S. Department of Labor reported Thursday. 

Jobless claims dropped to a 4-month low, and continuing claims, which lag by a week, rose 13,000 to 1.834 million.

Despite the recent decline in jobless claims, labor market conditions have softened from a year ago and earlier months in the year as employers avoid adding new staff. 

Investors are now awaiting the release of monthly nonfarm payroll data, which could provide additional insights into the current conditions of the labor market. 

 

U.S. Q2 GDP Growth Confirmed In Third Estimate

The second quarter GDP growth estimate was unrevised at 3.0% in the third estimate and higher than the 1.6% increase in the first quarter, the Bureau of Economic Analysis reported Thursday. 

The GDP update primarily reflected upward revisions to private inventory investment (8.3% from 7.5%) and federal government spending (4.3% from 3.3%) that were offset by downward revisions to nonresidential fixed investment (3.9% from 4.6%) and exports (1% from 1.6%). 

Imports, which are a subtraction in the calculation of GDP, were revised. 

The government agency also revised its GDP growth estimate in the first quarter to 1.6% from the previous estimate of 1.4%, primarily reflecting an upward revision to consumer spending that was partly offset by downward revisions to private inventory investment and residential fixed investment.

 

U.S. Durable Goods Orders Unchanged In August 

In other economic news, new orders for manufactured durable goods were nearly unchanged from the previous month in August, the U.S. Census Bureau reported Thursday. 

New order growth slowed sharply from the 9.8% surge in July, which was the highest rate of growth in four years. 

The better-than-expected orders contrasted with the growing pessimism about manufacturing sector activities, suggesting that the current slowdown may be temporary. 

New orders excluding transportation increased 0.5%, and excluding volatile defense goods eased 0.2%. 

On an annual basis, new orders for durable goods declined 1.3%. 

Non-defense capital goods orders declined 1.3% from the previous month in August, and excluding volatile aircraft orders rose 0.2%. 

From the previous year, non-defense capital goods orders dropped  6.5%, and excluding aircraft rose 0.3%. 

 

U.S. Indexes and Treasury Yields

The S&P 500 index increased 0.2% to 5,713.52, the Nasdaq Composite rose 0.2% to 18,114.49, and the Russell 2000 index rose 0.7% to 2,213.77. 

The yield on 2-year Treasury notes edged higher to 3.59%, 10-year Treasury notes inched up to 3.77%, and 30-year Treasury bonds inched higher to 4.12%.

WTI crude oil increased $2.25 to $67.42 a barrel, and natural gas prices edged down 1 cent to $2.80 a thermal unit.

Gold rose by $14.80 to $2,671.10 an ounce, and silver increased by $0.25 to $32.08.

The dollar index, which weighs the US currency against a basket of foreign currencies, edged higher to 100.77.

 

U.S. Stock Movers

Micron Technology soared 17% to $111.87 after the advanced semiconductor company reported better-than-expected quarterly results.

The company also estimated higher revenue and earnings in the current quarter. 

Southwest Airlines Company increased 9.8% to $31.26 after the regional airline announced its stock buyback plan of $2.5 billion. 

The company also said its third quarter revenue is expected to rise as much as 3% compared to its previous estimate of a decline of 2%. 

The company also announced a host of other changes to its business model and named Bob Fornaro, who previously led Spirit Airlines, to its board of directors. 

China-linked stocks soared for the third day in a row after China's politburo announced their commitment to revive economic growth to 5%. 

JD.com, Alibaba Group, Tencent Holdings, and Baidu jumped between 5% and 9%. 

 

European Indexes Jump 1% Tracking Higher Global Markets 

European markets advanced following the rise in global markets after China announced strong monetary stimulus. 

Benchmark indexes in Paris, London, and Frankfurt jumped as much as 1.5% after China's Politburo pledged to provide additional stimulus to meet an economic growth target of 5% in the current year. 

Chinese authorities are considering injecting as much as one trillion yuan in the state-controlled banks, the largest injection since 2008. 

In addition, Chinese authorities are considering providing direct cash assistance to as many as 25% of the population, which could increase consumption of basic items. 

Global tech stocks advanced after Micron Technology estimated higher sales and earnings, providing another upward push to semiconductor-related stocks in Europe, Japan, and South Korea. 

Closer to home, the Swiss National Bank lowered its policy rate by 25 basis points to 1.0%, a third consecutive decrease in rates, and the cost of borrowing dropped to the lowest since early 2023. 

The central bank noted that policymakers are prepared to lower rates in the coming quarters, if necessary, citing a weakening inflation outlook. 

The Swiss National Bank lowered its inflation outlook to 1.2% from 1.3% in 2024, 0.6% from 1.1% in 2025, and 0.7% from 1.0% in 2026. 

The central bank left its gross domestic product growth estimate at around 1% in 2024 and 1.5% in 2025. 

Bank lending to households increased 0.6% to Є6.891 trillion in August, accelerating from 0.5% in the previous month, the European Central Bank reported Tuesday. 

The increase in lending to households was the fastest since October 2023, amid a slight pick up in consumer demand. 

Meanwhile, lending to corporations increased by 0.8% to Є5.133 trillion, a faster increase than in July. 

Overall lending to the private sector, including households and non-financial corporations, increased by 1.6% from 1.3% in the previous month. 

 

Europe Indexes and Yields

The DAX index increased by 1.7% to 19,238.36; the CAC-40 index rose by 2.3% to 7,742.09; and the FTSE 100 index rose by 0.2% to 8,284.91. 

The yield on 10-year German bonds edged lower to 2.14%, French bonds inched lower to 2.94%, the UK gilts edged up to 3.99%, and Italian bonds decreased to 3.45%.

The euro edged lower to $1.11; the British pound inched higher to $1.33; and the U.S. dollar weakened to 84.72 Swiss cents.

Brent crude decreased $1.80 to $71.66 a barrel, and the Dutch TTF natural gas fell by €0.04 to €37.52 per MWh. 

 

Europe Stock Movers

H&M Mennes & Mauritz AB dropped 4.5% to SEK 174.10 after the Swedish apparel retailer reported weaker-than-expected fiscal this quarter results. 

China-linked companies in Europe advanced after Chinese leaders pledged additional support to meet the annual economic growth target rate of 5%. 

Vehicle makers, luxury goods purveyors, and mining companies advanced for the third session in a row. 

Antofagasta gained 5.7% to 2,030.0 pence, Anglo American jumped 5.9% to 2,434.0 pence, and Glencore increased 4.8% to 422.75 pence. 

LVMH soared 7.4% to €663.50, Hermes International SCA added 7.2% to €2,178.0, Kering SA advanced 8.2% to €247.80, Richemont SA jumped 5.6% to CHF 129.40, Moncler SpA increased 6.6% to €52.08, and Prada gained 2.4% to €6.18. 

Puma SE increased 4.3% to €38.45 after the athletic footwear maker appointed Markus Neubrand as the company's chief financial officer and a board member. 

Commerzbank AG increased 5.3% to €16.17 after the German lender estimated higher profit and return on equity by 2027.

BASF SE decreased 2.2% to €44.33 after the German chemical company announced its plans to lower its fiscal year 2024 dividend to at least €2.25 per share, payable in 2025. 

The revised dividend is a decrease from the €3.40 per share dividend paid in 2023. 

The German chemical company plans to distribute €12 billion between 2025 and 2028, including €8 billion of stock buybacks and €2 billion of dividend payments, the company said in a statement. 

The company also estimated cumulative dividends to exceed €12 billion in the period between 2025 and 2028 and return on capital to reach 10% by 2028.

SMA Solar Technology AG increased 2.2% to €17.48 after the German company announced a companywide restructuring to increase efficiency, sharpen strategic focus, and lower operating costs. 

 

Rally In Semiconductor Stocks Powered 2.5% Surge In Japan Indexes 

Stock market indexes in Tokyo traded at three-week highs following a rebound in semiconductor and related stocks. 

The Nikkei 225 stock average and the Topix index jumped more than 2.5% after Micron Technology reported better-than-expected quarterly results after the close of the regular trading session in New York. 

Investors also reviewed the latest policy meeting minutes, and several policymakers cautioned against creating excessive expectations about future rate hikes and called for sharper focus on upward inflation risks. 

The yen traded in a tight range and edged up 0.04% to 144.77 after the Bank of Japan's policy meeting minutes showed the committee prefers a gradual approach to increasing interest rates in the future. 

The surge in semiconductor stocks also boosted market indexes in South Korea, and the KOSPI index advanced 2.6%. 

In other Asian markets, benchmark indexes in India crossed another record high and extended a string of highs to close to 60 in 2024, amid positive market sentiment and earnings optimism. 

Benchmark indexes in mainland China and Hong Kong extended their three-day tally to over 7% as investors stepped up to buy riskier stocks in the hopes of additional market-supportive measures following the announcement of wide-ranging monetary stimulus measures. 

 

Japan Stock Movers 

The Nikkei 225 Stock Average jumped 2.8% to 38,925.63, and the broader Topix index advanced 2.6% to 2,721.12. 

Tech stocks led the surge in Tokyo trading in the hopes of improving business after Micron Technology reported better-than-expected quarterly results. 

Tokyo Electron jumped 8% to ¥25,760.0, Advantest soared 5.4% to ¥6,900.0, Screen Holdings gained 5.9% to ¥10,410.0, and Lasertec added 0.1% to ¥24,250.0. 

Banks also participated in the market surge after the latest policy meeting minutes suggested that the central bank is looking to raise rates in gradual steps and not in sharp increments.

Mitsubishi UFJ Financial advanced 2.5% to ¥1,481.50, Sumitomo Mitsui added 3.2% to ¥9,174.0, and Mizuho Financial Group gained 2.7% to ¥2,894.50. 

Retail stocks traded higher amid market rally and stable yen. 

Seven & I Holdings increased 2.1% to ¥2,206.50, Aeon Co. Ltd. gained 1.6% to ¥2,206.50, Fast Retailing advanced 1.7% to ¥47,900.0, and Isetan Mitsukoshi jumped 7.6% to ¥2,326.0. 

 

China's Indexes Extended Stimulus Rally to Third Day Amid Hopes of Additional Measures 

Benchmark indexes in mainland China and Hong Kong extended gains for the third consecutive day after Beijing rolled out stimulus measures. 

The Hang Seng index jumped 2.7% and the CSI 300 index advanced 2.3%, and the benchmark indexes extended three-day gains to over 7%. 

The wide-ranging stimulus measures revived market confidence in Beijing's leadership in the hopes that the regulators and policymakers are finally serious about reviving economic growth and tackling multi-year property market malaise. 

Investors stepped up to buy tech- and consumer-focused stocks amid expectations that the Politburo is likely to approve injecting as much as one trillion yuan into state-controlled banks. 

Despite the wide-ranging monetary policy measures released by the People's Bank of China, caution prevailed in stock trading amid worries of weak consumer sentiment and persistent weakness in the residential property market. 

 

China Stock Movers 

The Hang Seng index soared 2.7% to 19,641.05, and the mainland-focused CSI 300 index jumped 2.3% to 3,478.54. 

Tech stocks led gainers in Hong Kong after investors stepped up to increase exposure to high-growth and riskier stocks. 

Tencent Holdings jumped 4% to $421.60, Alibaba Group advanced 6.5% to HK $97.25, and JD.com soared 8.2% to HK $136.10. 

China Vanke added 13.4% to HK $5.34, China Resources Land added 11.9% to HK $24.45, and Longfor Group jumped 10.2% to HK $10.34. 

New World Development was halted at HK$8.19, and the company's chief executive, Adrian Cheng, is set to step down ahead of the company's releasing its annual financial results later in the day. 

The residential property developer is expected to announce losses totaling as much as HK $20 billion or $2.5 billion, reflecting a sharp decline in property valuations. 

Hong Kong-based property developers were in focus after New World Development news. 

CK Asset Holdings dropped as much as 1.5% to HK $32.35 before recovering to trade higher by 0.2% to HK $32.80. 

Sun Hung Kai Properties edged up 0.2% to HK $82.95 and rebounded from earlier losses of as much as 1.3%.