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In today’s edition,
- Bull market hits milestone
- Investors unimpressed by Tesla’s event
- BlackRock sees record asset growth
- Bank profits exceed expectations
- Five factors driving crypto
Market Snapshot
Major US stock indexes reached new all-time highs on Friday. The S&P 500 Index (SPX) surpassed the 5,800 mark for the first time, closing at 5,815.03, up 1.35% for the week. The SPX has now gained more than 60% since its 2022 low of 3,577 recorded on October 12, two years ago. This marks the fifth consecutive week of gains for the index.
The Dow Jones Industrial Average (DJIA) also closed at a new high, ending the week at 42,863.86, up 1.36%. However, the Nasdaq Composite (COMP) closed at 18,342.94, up 1.45% for the week but still below its July peak. The Nasdaq’s performance reflects a rotation of investor interest from technology stocks into other sectors.
The market rally was supported by calming wholesale inflation data and strong earnings reports from two major banks. September’s Producer Price Index (PPI) remained flat, coming in below expectations of a 0.1% increase and down from a 0.2% rise in August. The core PPI, which excludes volatile food and energy prices, rose by 0.2%, aligning with consensus estimates and down from 0.3% in August. This easing in wholesale inflation soothed investors following warmer-than-expected consumer price data released the previous day.
The solid earnings from the banking sector added to the positive sentiment, indicating economic resilience. Investors interpreted these results as a sign that the economy is continuing to recover, fueling optimism in the markets.
Stock market closing data for the week of Oct 7th to Oct 11th, 2024
News Summaries
Tesla’s shares tumbled nearly 9% on Friday, wiping out $67 billion from the company’s market value. This happened after Elon Musk’s Robotaxi event. It left investors disappointed due to a lack of technical details about the planned autonomous “Cybercabs.” Musk promised a two-seat, $30,000 vehicle without a steering wheel or pedals. It will launch by 2026, pending regulatory approval. However, analysts criticized the event for not explaining how Tesla plans to achieve these ambitious goals. The presentation prioritized design and vision over tech advancements. As a result, Tesla was the worst performer on the S&P 500 that day, even though it remains the world’s most valuable car company with a market cap of $696 billion. Analysts called the event “underwhelming” and “toothless.” They suggested that Uber and Lyft, whose stocks rose 9% and 10%, could benefit from Tesla’s misstep. Investors were let down by Musk’s history of missing self-driving targets. They were also disappointed by the lack of a $25,000, cheaper electric vehicle, the Model 2.
BlackRock Inc. attracted a record $160 billion from clients into its long-term investment products in the third quarter. This pushed its assets under management to a record $11.5 trillion. This included $97 billion into exchange-traded funds and $63 billion into fixed-income funds. This beat analysts’ expectations of $100 billion in total inflows. So far this year, BlackRock has gathered $360 billion in net inflows, already surpassing its full-year totals for both 2022 and 2023. The company’s revenue grew 15% from the previous year to $5.2 billion, and adjusted net income per share increased 5% to $11.46. BlackRock is expanding its reach across public and private markets. After the quarter, it completed a $12.5 billion acquisition of Global Infrastructure Partners. It is also buying private-markets data firm Preqin for £2.55 billion ($3.3 billion). The firm is considering buying HPS Investment Partners. It could be worth over $10 billion. This would strengthen its position in the private credit market. Despite these developments, BlackRock’s shares have risen about 18% this year, slightly behind the S&P 500 Index’s 21% gain.
US bank stocks are at their highest since before the Silicon Valley Bank collapse. Stronger-than-expected profits from JPMorgan Chase and Wells Fargo caused this. This boost has raised hopes for a “soft landing” for the economy. Both banks saw a drop in quarterly net income compared to last year. JPMorgan’s net income dipped 2% to $12.9 billion. Wells Fargo’s fell 11% to $5.1 billion. Still, they beat analysts’ forecasts of $12.1 billion and $4.5 billion, respectively. As a result, JPMorgan’s shares climbed 4.4%, while Wells Fargo’s shares increased 5.6%. The KBW bank index, which tracks major banks, rose over 3%, hitting its highest close since April 2022. These results suggest that the Federal Reserve’s efforts to control inflation without causing a recession might be working. JPMorgan’s CFO, Jeremy Barnum, mentioned that the earnings fit with the “soft landing” narrative. While consumer spending has slowed somewhat, it remains within normal ranges. However, banks expect some pressure on net interest income due to falling interest rates. JPMorgan reported a 3% increase in net interest income to $23.5 billion and raised its 2024 guidance to $92.5 billion. Investment banking also showed strong performance, with JPMorgan’s fees up nearly 33% to $2.3 billion. We’ll learn more about the banking sector’s health when other major banks release their earnings soon.
From the World of Crypto
Understanding what moves the cryptocurrency markets can help you navigate this asset class.
There are five key areas to consider: innovation, regulation, macroeconomic factors, narratives, and events like wars or major hacks.
First, innovation brings new use cases, which attract users and increase demand. This can lead to more transactions and potentially higher prices over time. Without ongoing innovation, markets may stagnate.
Second, regulation plays a big role. Clear and supportive regulations reduce risk for both users and institutions, encouraging more investment and funding. However, poor regulation can hamper market growth.
Macroeconomic factors are also crucial.
When people have more disposable income—due to things like rate cuts or quantitative easing—they’re more likely to invest in markets, including crypto. An influx of cash can drive prices up. Narratives come into play by directing where this new money goes. If certain tokens or use cases grab attention, they may attract more investment, sometimes regardless of their fundamental value.
Lastly, events such as wars, currency failures, hacks, and scams can significantly impact the market. Large-scale conflicts might cause investors to pull out of risky assets like cryptocurrencies.
Currency failures could push investors toward assets like Bitcoin. However, failures, hacks, and scams can deter new users, lead to stricter regulations, and create negative perceptions.
While these factors set the stage, the key ingredient is global liquidity—the amount of cash circulating in the system. An increase in global liquidity, expected between now and September 2025 (see Figure 1), could provide the necessary boost for crypto markets to grow. Although nothing is certain, the conditions suggest that the market may be ready for expansion in the coming years.
