The Week In Review 01/22/2024
“A cynic is a man who knows the price of everything, and the value of nothing.” ~ Oscar Wilde
Good Morning ,
Our holiday shortened week closed on a strong note… with the S&P 500 sitting at a fresh record high (4,839.81) and up 1.5% for the year.
The Nasdaq Composite is up 2.0% for the year thanks to last week's gain and the Dow Jones Industrial Average is up 0.5%.
Gains were largely driven by outperforming mega cap and semiconductor shares… NVIDIA was a standout winner, enjoying a 8.7% gain on the week.
The broader market saw softer price action due to rising market rates as participants recalibrated rate cut expectations due to comments from some Fed officials.
More strong economic data that is not likely to persuade the Fed to cut rates as soon, or as much as the markets hoped. The 2-yr note yield jumped 26 basis points to 4.41% and the 10-yr note yield climbed 20 basis points to 4.15%.
Fed Governor Waller (FOMC voter) indicated that the Fed could begin cutting rates this year, but reiterated the Fed's estimate for three cuts rather than six cuts that the market expects.
The December Retail Sales report, the Housing Starts data for December, and weekly initial jobless claims were all stronger than expected and the preliminary reading of the University of Michigan's Consumer Sentiment Index for January was well ahead of estimates, hitting its highest level since July 2021 with year-ahead inflation expectations decelerating to 2.9% from 3.1%, a rate not seen in just over three years.
The implied likelihood of a 25-bps cut at the March FOMC meeting now sits at 45.4% versus 81.0% last Friday.
Market participants were also digesting more earnings results from the likes of Goldman Sachs, Morgan Stanley, and Dow component Travelers, which garnered mixed reactions.
Five of the 11 S&P 500 sectors registered gains last week. The heavily weighted information technology sector was the top gainer by a wide margin, jumping 4.3% thanks to the strength in NVDA and its other mega cap components. Meanwhile, the rate-sensitive utilities (-3.7%) and real estate (-2.1%) sectors saw some of the largest declines.
Market Snapshot…
- Oil Prices – Oil prices were flat but headed for a weekly gain. West Texas Intermediate crude futures (WTI) fell 10 cents to close at $73.98 a barrel. Brent crude futures fell 10 cents to close at $79 a barrel.
- Gold– Gold prices firmed but still fell for the second week. Spot Gold rose nearly 0.3% to $2,027.98 per ounce while U.S. gold futures rose around 0.5% higher to $2,030.60. Silver finished the week at $22.711.
- U.S. Dollar– The dollar index edged lower but seemed poised for a weekly gain. The dollar index was down 0.3% at 103.26 but was up 0.8% for the week. Euro/US$ exchange rate is now 1.09.
- U.S. Treasury Rates– Treasury yields were little changed Friday. The yield on the 10-year Treasury note was marginally lower at 4.14%.
- Asian shares were mixed in overnight trading.
- European markets are trading higher.
- Domestic markets are trading in the green this morning.
The American consumer once again proved resilient in the present economy. Many expected households to pinch pennies during the holiday season but that doesn’t appear to be the case.
This week’s highlight will be the preliminary GDP report for the fourth quarter as well as December’s PCE report. GDP posted good growth in the first three quarters of 2023, including a 4.9% print in the most recent quarter.
We believe this report will be a bit tamer, but still come in positive, especially given the strength of consumer spending which makes up 70% of GDP. The consensus forecast is 1.8%.
Both reports will be the last major releases before the Fed’s first meeting of 2024 on January 30 and 31.
Have a wonderful week!
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