Key Highlights

  • Methode Electronics jumped on Friday, grouped with Arrow Electronics, Proto Labs and SolarEdge among stocks posting sharp gains tied to the weak payrolls data pulling Treasury yields lower.
  • The company designs custom electronic and electro-mechanical components, including lighting systems, sensors, switches and control panels for cars and trucks, along with industrial and medical components.
  • Autos had a mixed day: Tesla rose sharply after beating delivery estimates, while Ford reported lower US sales and said a mid-September F-150 supplier issue is contained within guidance; Rivian fell despite record deliveries.
  • Market breadth was narrow, with only about one in five S&P 500 stocks trading above their 50-day moving averages, and the Russell 2000 finished the week slightly lower despite Friday's gain.

Methode Electronics jumped with a group of component and hardware stocks as softer jobs data eased pressure on rates. Shares jumped on Friday as small-cap makers of electronic components and hardware rallied in the wake of a disappointing jobs report. NYSE:MEI was named in commentary on sharp gains for Arrow Electronics, Methode Electronics, Proto Labs and SolarEdge, which tied the moves to the weak payrolls data pulling Treasury yields and rate-hike expectations lower. No Methode-specific news was found. The company is a member of the S&P SmallCap 600.

Inside Methode

Methode, based in the Chicago area, designs and makes custom electronic and electro-mechanical components. Its products include lighting systems, sensors, switches and control panels for cars and trucks, along with power distribution products and industrial and medical components.

The automotive Business has historically been its largest, which ties Methode to vehicle production volumes and to how quickly carmakers are adopting new electronic features. Its industrial business, including power distribution gear, links it to factory and infrastructure spending.

Because of that mix, Methode is the kind of small industrial supplier that tends to move with the economic cycle and with interest rates.

The Jobs Report

The Bureau of Labor Statistics said the US added just 29,000 jobs in September, far short of the roughly 84,000 economists had expected. July and August were revised lower by a combined 60,000, and the Unemployment rate ticked up. Average hourly Earnings grew at the slowest annual pace since May 2021.

That cooled fears that the Federal Reserve, which raised rates on September 16 for the first time since 2023, will tighten again at its October 27-28 meeting. Odds of an October hike fell to roughly one in five after the report, though they partly recovered by the close.

Capital.com's Kyle Rodda said the odds of a Fed hike this month have receded.

The Company It Kept

The stocks grouped with Methode span several corners of the hardware world. Arrow Electronics, one of the biggest electronic-components distributors, jumped on the S&P MidCap 400. Proto Labs, which offers rapid custom Manufacturing of parts, also climbed. SolarEdge, which makes solar inverters, soared.

Elsewhere in components, Avnet hit a 52-week high of $107.15, and connector and power names across the chip sector rallied. Microchip Technology and Texas Instruments ranked among the Nasdaq-100's top gainers.

Autos had a mixed day. Tesla rose sharply after third-quarter deliveries of 486,532 beat forecasts, while Ford reported that its US sales fell in the quarter and said a mid-September F-150 supplier issue is contained within guidance. Rivian fell despite record deliveries.

A Caution Flag From Bonds

Not everything went the way rate-sensitive investors hoped. Treasury yields fell immediately after the payrolls data, then reversed and closed higher. The 10-year finished near its highest level since 2002, and the 2-year and 30-year yields also rose.

Market breadth was also narrow. Only about one in five S&P 500 stocks were trading above their 50-day moving averages, meaning many companies have not shared in the market's gains. The Russell 2000 rose 26.27 points to 2,832.89 on Friday but finished the week slightly lower.

Auto and Industrial Demand Will Be the Real Test

Methode's next Quarterly Report will show whether auto and industrial demand is stabilizing. In the meantime, watch automakers' production plans, the September Inflation reports and the Fed's October 27-28 decision. Long-term Treasury yields, which closed Friday near their highest level since 2002, remain a key Factor for small industrial stocks.