The Week In Review 01/29/2024
The supreme art of war is to subdue the enemy without fighting ~ Sun Tzu
Good Morning,
The stock market logged more gains last week, which brought the S&P 500 to fresh record highs.
Gains were broader based compared to the previous week, which featured the outperformance of mega cap stocks.
The broadening out of buying activity left eight of the 11 S&P 500 sectors higher last week.
The energy sector saw the largest gain, jumping 5.2%, followed by the communication services sector, which gained 4.5%. The three laggards to log a decline were consumer discretionary (-1.4%), real estate (-0.5%), and health care (-0.2%).
The consumer discretionary sector was clipped by a big loss in shares of Tesla, which dropped 13.6% last week after disappointing earnings and guidance. Microsoft was a winning standout from the mega cap space, topping a $3 trillion market cap for the first-time last week.
Other notable names that disappointed with earnings and/or guidance in addition to Tesla included Humana, 3M, Johnson & Johnson, AT&T, DuPont, and Kimberly-Clark.
Intel, Texas Instruments, and KLA Corporation also sold off after reporting quarterly results, which weighed on the broader semiconductor space and offset earnings-related strength in ASML.
Companies that received positive reactions to earnings results and/or guidance included Netflix, United Airlines, Verizon, and Procter & Gamble.
Last week brought some pleasing data in terms of ongoing strength in the economy and cooling inflation. The Advance Q4 GDP report showed that real GDP rose 3.3% versus an expected 2.0% and the GDP Price Deflator increased 1.5% versus an expected 2.8%.
Personal income increased 0.3% month-over-month in December, as expected, but personal spending increased a much stronger-than-expected 0.7% (consensus 0.4%). The inflation gauges were spot-on with expectations. The PCE Price Index was up 0.2% month-over-month and so was the core-PCE Price Index, which excludes food and energy.
With the December changes, the Fed’s favorite metric on inflation, the PCE Price Index was up 2.6% year-over-year, unchanged from November, and the core PCE Price Index was up 2.9% -- the lowest since March 2021 -- versus 3.2% in November.
The U.S. economy continued its better-than-expected growth in the fourth quarter, growing at an annualized 3.3% in the fourth quarter, and 2.5% for the entire year.
The growth was above the 2% expected by most economists. The overall rate is at 3.1% for the full year.
Market Snapshot…
- Oil Prices – Oil prices closed out their best week as a better economy raised hopes for more robust crude demand this year. West Texas Intermediate crude futures (WTI) gained 65 cents, or 0.84%, to close at $78.01 a barrel. Brent crude futures were up $1.12, or 1.36%, to close at $83.55 a barrel.
- Gold– Gold prices held steady as investors eyed the Fed’s policy meeting due next week. Spot Gold was down 0.1% to $2,017.94 per ounce while U.S. gold futures were little changed to $2,018.1. Silver finished last week at $22.872.
- U.S. Dollar– The dollar index inched lower due to data inflation. The dollar index was down 0.1% at 103.41. Euro/US$ exchange rate is now 1.082.
- U.S. Treasury Rates– Treasury yields moved only slightly as investors assessed inflation readings. The yield on the 10-year Treasury note was up less than 1 basis point at 4.141%.
- Asian shares were higher in overnight trading.
- European markets are trading mixed.
- Domestic markets are trading slightly higher this morning.
This week will feature the Fed’s first policy meeting of 2024. We expect it to hold the federal funds rate steady at a range of 5.25-5.50%. Chairman Powell will speak following the meeting, where he will hopefully provide some clarity on when rate cuts could be expected. Many still expect the cutting cycle to begin in March.
Have a wonderful week!
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