Here are the economic and market highlights for the week:
- Inflationary pressures continued to ease with the Personal Consumption Expenditures (PCE) Index registering a 2.20% increase YOY in August. This is the Fed’s preferred measure of inflation. August’s reading was both lower than expected and the lowest since early 2021. Month-to-month, the PCE price index rose just 0.10%. Excluding food and energy, core PCE rose 0.10% in August and was higher by 2.70% from a year ago. Personal income and spending also came in slightly on the lighter side. Personal income increased 0.20% on the month while spending rose 0.20%, below estimates of 0.40% and 0.30%, respectively.
- Durable goods orders came in flat in August, defying economists’ forecasts for a 3.00% drop. That follows July’s durable goods orders which were revised higher to 9.90% from a prior estimate of a 9.80% gain. Core capital goods orders, which exclude the volatile transportation and defense sectors and are a closely watched proxy for business spending plans, rose 0.20% last month, a rebound from a -0.20% drop in July. Business spending should continue to gather momentum in the quarters ahead as the Fed’s interest rate cuts make their way through the economy.
Neutral Economic Data Placates Investors
Stocks continued to set more record highs this week, spurred by a series of reports that were just good enough. The Dow Jones Industrial Average ended Friday’s trading session at a new record high, following the S&P 500’s record high on Thursday. Friday also marked the third straight winning week for the economically sensitive Dow, helped by economic data continuing to thread the needle. Inflationary pressures showed continued signs of easing while business spending on equipment and machinery moved higher in signs of business optimism. All three major indices are now on track to end September higher.
Despite a historically seasonally weak month for stocks, this September has bucked the trend with equities maintaining their upward bias. The primary catalyst for the recent rally has been the Fed’s easing, which historically has helped stocks. Stable domestic data, China’s newly announced stimulus package, and other central banks shifting to a more accommodative posture have also added lift as well. This week’s final revision to Q2’s GDP showed that growth held at a 3% pace last quarter and the Atlanta Fed has penciled in a 2.90% estimate for Q3. Bond investors have taken note of that healthy growth rate, pushing the 10-year U.S. treasury yield to a high of 3.80% this week despite the market anticipating that the Fed will cut an additional 2% over the next 12 months. Rates have moved higher in part by better-than-expected data as well as the bond market having already priced in much of the central bank’s rate cuts. Absent further signs of weakening, bonds are likely to remain range bound. The next test for markets could come from next week’s September jobs report. The most recent weekly initial jobless claims suggest that employment and, de facto, demand are unlikely to fall off a cliff. So long as the data stays just good enough and even lower rates are ahead, investors have seemed content to drive markets higher.
The Week Ahead
A big week for markets with nonfarm payrolls, manufacturing and services on deck.
The Running of the Wieners
One hundred dachshund pups – each dressed in a hot dog bun costume – raced last Friday morning for the coveted title of fastest wiener dog in Cincinnati, OH. A pup named Moose was crowned the winning wiener and not only won barking rights but also a year’s supply of dog food. The Running of the Wieners takes place at Oktoberfest Zinzinnati which is the largest Oktoberfest celebration in the U.S. The event began in 1976 to celebrate the city’s rich German heritage, and it attracts around 800,000 people over the four-day festival.
The first Oktoberfest dates back to 1810 in Munich, Germany. The celebration was held on October 12 to commemorate the marriage of Bavaria’s crown prince, who later became King Louis I, to Princess Therese von Sachsen-Hildburghausen. The original festival was so popular that it became an annual event with vendors selling food and drink, which eventually evolved into beer halls erected by Munich’s brewers. Over time, the event grew to a 16-day celebration, and the date shifted earlier to avoid the rainy October weather. This year’s Munich Oktoberfest started September 21st, 2024 and runs until October 6th, 2024, since it always ends on the first Sunday in October.
German immigrants brought the celebration to the U.S., and it’s no surprise that Ohio boasts the largest Oktoberfest in the U.S. The Buckeye State is home to one of the largest German American populations in the country according to the 2022 U.S. Census with more than 2.7 million German Americans. Oktoberfest Zinzinnati is also home to The Gemütlichkeit Games. Gemütlichkeit loosely translates to cordiality and includes a series of fun competitions associated with Bavarian culture. The games include beer barrel rolling, stein races, and a stein hoisting competition where participants compete to see who can hold a one-liter stein of beer out in front of them the longest with a straight arm without spilling or bending their elbow. Another beloved Oktoberfest Zinzinnati tradition is the World’s Largest Chicken Dance. This year’s dance leaders were two former NFL players, David Fulcher and Ickey Woods, of the Cincinnati Bengals 1988 Super Bowl team. In spite of all of the entertainment, live Bavarian music, multiple beer gardens, and more, many will argue that the most popular event at Oktoberfest Zinzinnati is The Running of the Weiners. The race for top dog is open to pure bred dachshunds and doxie mixes (doxie is short for dauchshund) as long as they are the average weight and length of a dachshund. The dashing dachshunds race 75 feet in groups of 10 with the winners from each race competing in the final “weiner takes all” heat to be crowned the fastest wiener. Dachshunds are a German breed whose history can be traced back to the late 15th and early 16th century. The official name “dachshund” means “badger dog,” and the dogs were used to help hunt small animals.
According to the Oktoberfest Zinzinnati website, each year, visitors consume an astounding and impressive amount of German food. This includes 87,542 metts (minced or ground pork seasoned and served raw), 64,000 sauerkraut balls, 24,640 potato pancakes, 20,000 cream puffs, 6,000 jumbo pickles, 1,875 pounds of German potato salad, 700 pig tails, 80,500 bratwurst, 56,250 sausages, 23,004 soft pretzels, 16,002 strudel, 3,600 pounds of sauerkraut, 702 pounds of Limburger cheese, and 400 pickled pigs’ feet.
Many cities across the U.S. hold their own Oktoberfest celebrations this time of year. To those dusting off their lederhosen and joining the revelry, we say “Cheers”—or, rather, Prost!