The Week in Review 03/04/2024

"Software is eating the world, but AI is going to eat software." - Jensen Huang, May 2017

Good Morning ,

After a cautious start to the week, buying picked up giving us a new all-time high in the NASDAQ! It was the last major index to reach a new record high in the uptrend that brought the S&P 500 and Dow Jones Industrial Average to new all-time closing highs earlier this year.

The fact that the S&P 500 and Dow Jones Industrial Average had already reached fresh record highs this year, and the Nasdaq Composite was approaching its record close coming into the week, contributed to a growing feeling among some participants that stocks are due for a pullback.

This notion drove the early lackluster price action as participants waited on market-moving events, including the Fed's preferred measure of inflation on Thursday in the form of PCE Price Indexes.

The Personal Income and Spending Report for January didn't contain any surprises and the PCE Price Indexes were in-line with expectations, showing year-over-year disinflation for the PCE Price Index to 2.4% (from 2.6%) and the core-PCE Price Index to 2.8% (from 2.9%).

This report alone was not the catalyst for the upside moves in the final few sessions of the week and garnered a muted response from investors. Importantly, though, the report did not force the market to rethink its rate-cut view for the year, which acted as a support factor for the market.

The Fed’s preferred inflation index—the PCE price index—rose 0.3% in the month of January according to the Bureau of Economic Analysis. Core PCE, which has been slightly stickier, rose 0.4% in the month of January and 2.8% year-over-year. The monthly gain is the largest since January 2023.

The gains last week were largely driven by mega cap and semiconductor-related stocks, but many other stocks participated in upside moves. Shares of NVIDIA and Meta Platforms, for example, gained 4.4% and 3.7%, respectively.

Dow component Salesforce was another winning standout after reporting earnings, jumping 8.2% this week.

Small cap stocks also outperformed the broader market, leading the Russell 2000 to gain 3.0%.

The only S&P 500 sectors to lose ground were health care (-1.1%) while the utilities (-0.6%), consumer staples (-0.5%), communication services (-0.3%), and financials (-0.1%) sectors saw relatively slim declines. The information technology sector, which constitutes 30% of the index, gained 2.5%. It was the best performer followed by the real estate (+2.1%) and consumer discretionary (+2.0%) sectors.

Treasury yields declined last week, acting as added support for the stock market.

The 2-yr note yield sank 19 basis points to 4.53% and the 10-yr note yield settled eight basis points lower at 4.18%. This price action followed a disappointing $63 billion 2-yr note auction and the $64 billion 5-yr note sale, and a solid $42 billion 7-yr note offering.

In corporate news, UnitedHealth (UNH) lost ground on news that the Department of Justice has launched an antitrust investigation into the company, according to The Wall Street Journal.

Apple is cancelling efforts to build an electric car and will focus on generative artificial intelligence, according to Bloomberg.

Lastly, New York Community Bancorp acknowledged that it has identified material weaknesses in the company's internal controls related to internal loan review.

Market Snapshot…

• Oil Prices – Crude oil futures reached $80 a barrel as signs point to a tightening market. West Texas Intermediate crude futures (WTI) gained $1.71, or 2.19%, to settle at $79.97 a barrel. Brent crude futures added $1.71, or 2.09% to close at $83.94 a barrel.
• Gold– Gold prices rose to a two-month high after expectations of an interest rate cut by June. Spot Gold was up 2.1% to $2,086.21 per ounce and was on track for a second straight weekly rise. U.S. gold futures settled 2% higher to $2,095.7. Silver finished the week at $23.364.
• S. Dollar– The dollar index dipped 0.23% to 103.87. The dollar was pulled down on weaker than expected U.S. economic data. Euro/US$ exchange rate is now 1.087.
• S. Treasury Rates– Treasury yields declined as investors mulled fresh economic data and how it could impact Fed monetary policies. The yield on the 10-year Treasury note dropped more than 6 basis points at 4.188%.
• Asian shares were mostly higher in overnight trading.
• European markets are trading lower.
• Domestic markets are off slightly this morning.

This week, much focus will be given to Chairman Powell’s testimony in front of the House Financials Services Committee on Wednesday and the Senate Banking Committee on Thursday. His prepared remarks will likely reiterate the Fed’s assessment from its last policy meeting. In addition to that, we will receive January’s jobs report on Friday.

Have a wonderful week!

The opinions expressed herein are those of Michael Hilger and not necessarily those of Raymond James & Associates, Inc., and are subject to change without notice. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. There is no assurance any of the trends mentioned will continue or forecasts will occur. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Investing involves risk and you may incur a profit or loss regardless of strategy selected.
The information contained herein is general in nature and does not constitute legal or tax advice. Inclusion of these indexes is for illustrative purposes only. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor's results will vary. Past performance does not guarantee future results. The Dow Jones Industrial Average (INDU) is the most widely used indicator of the overall condition of the stock market, a price-weighted average of 30 actively traded blue chip stocks, primarily industrials. The Dow Jones Transportation Average (DJTA, also called the "Dow Jones Transports") is a U.S. stock market index from the Dow Jones Indices of the transportation sector, and is the most widely recognized gauge of the American transportation sector. Standard & Poor's 500 (SPX) is a basket of 500 stocks that are considered to be widely held. The S&P 500 index is weighted by market value, and its performance is thought to be representative of the stock market as a whole. The S&P 500 is an unmanaged index of widely held stocks that is generally representative of the U.S. stock market. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs and other fees, which will affect investment performance. Individual investor’s results will vary. The NASDAQ Composite Index (COMP.Q) is an index that indicates price movements of securities in the over-the-counter market. It includes all domestic common stocks in the NASDAQ System (approximately 5,000 stocks) and is weighted according to the market value of each listed issue. The NASDAQ-100 (^NDX) is a modified capitalization-weighted index. It is based on exchange, and it is not an index of U.S.-based companies. The Russell 2000 index is an unmanaged index of small cap securities which generally involve greater risks.
U.S. government bonds and Treasury notes are guaranteed by the U.S. government and, if held to maturity, offer a fixed rate of return, and guaranteed principal value. U.S. government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury notes are certificates reflecting intermediate-term (2 - 10 years) obligations of the U.S. government.
The companies engaged in business related to a specific sector are subject to fierce competition and their products and services may be subject to rapit obsolescence. There are additional risks associated with investing in an individual sector, including limited diversification.
Diversification does not ensure a profit or guarantee against a loss.
Investing in oil involves special risks, including the potential adverse effects of state and federal regulation and may not be suitable for all investors.
International investing involves special risks, including currency fluctuations, differing financial accounting standards, and possible political and economic volatility.
The companies engaged in the communications and technology industries are subject to fierce competition and their products and services may be subject to rapid obsolescence.
Gold is subject to the special risks associated with investing in precious metals, including but not limited to: price may be subject to wide fluctuation; the market is relatively limited; the sources are concentrated in countries that have the potential for instability; and the market is unregulated.
The information contained within this commercial email has been obtained from sources considered reliable, but we do not guarantee the foregoing material is accurate or complete.
Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Prior to making an investment decision, please consult with your financial advisor about your individual situation.
Charts are reprinted with permission, further reproduction is strictly prohibited.
If you would like to be removed from this e-Mail Alert Notification, PLEASE click the Reply button, type "remove" or "unsubscribe" in the subject line and include your name in the message, then click Send.