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.
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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%.
Index | Started Week | Ended Week | Change | % Change | YTD % |
---|---|---|---|---|---|
DJIA | 39131.5 | 39087.4 | -44.15 | -0.1 | 3.7 |
Nasdaq | 15996.8 | 16274.9 | 278.12 | 1.7 | 8.4 |
S&P 500 | 5088.8 | 5137.08 | 48.28 | 0.9 | 7.7 |
Russell 2000 | 2016.69 | 2076.39 | 59.7 | 3 | 2.4 |
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!
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