The Week in Review: 03/11/2024

“The greatest danger for most of us is not that our aim is too high and we miss it, but that it is too low and we reach it.” – Michelangelo

Good Morning,

It was a busy week in terms of market-moving events and price action at the index level. Market participants received earnings results from retailers like Target and Costco, and earnings from Broadcom. The economic calendar was headlined by the February ISM Non-Manufacturing Index on Tuesday and February Jobs Report on Friday.

Also, Fed Chair Powell delivered his semiannual monetary policy testimony before Congress on Wednesday and Thursday, but this did not move the market as much as some aforementioned events and general consolidation activity. Mr. Powell reiterated the Fed's view that there is no rush to cut rates, but that it will likely be appropriate to cut rates later this year if the economy evolves as expected. There was also some positive buzz this week around the potential for the ECB to cut rates later this year like the Fed is expected to.

This week's economic data largely corroborated the market's thinking about rate cuts, and about a soft landing scenario for the market. The ISM Non-Manufacturing Index showed that business activity and order growth improved in February, but the Employment Index fell below 50.0%, indicating a contraction for the second time in the past three months.

The February jobs report showed nonfarm payrolls increased by a better-than-expected 217,000 following a downwardly revised 229,000 increase in January, the unemployment rate rose to 3.9% from 3.7%, and average hourly earnings growth was smaller than expected at 0.1% month-over-month.

A large driving factor for price action this week was general consolidation activity after a big run that had the major indices, and many individual stocks, sitting at all-time highs. Mega cap stocks and semiconductor-related shares, which led market gains on the way up, experienced profit-taking activity this week.

The broader market, aside from mega caps and semiconductor shares, enjoyed some buy-the-dip action in the latter part of the week.

Only three S&P 500 sectors logged declines, reflecting the underperformance of tech stocks and mega caps. The consumer discretionary sector logged the largest loss, down 2.6%, followed by information technology (-1.1%) and communication services (-0.7%). Meanwhile, the utilities (+3.2%), materials (+1.6%), real estate (+1.5%), and energy (+1.2%) sectors all registered decent gains this week.

Treasuries settled the week with gains, digesting the economic data and rate cut implications from Fed Chair Powell's testimony. The 2-yr note yield declined four basis points this week to 4.49%. The 10-yr note yield declined nine basis points this week to 4.09%.

Market Snapshot…

• Oil Prices – Crude oil futures posted a weekly loss when demand out of China waned. West Texas Intermediate crude futures (WTI) fell 92 cents, or 1.17%, to settle at $78.01 a barrel. Brent crude futures dropped 88 cents, or 1.06% to close at $82.08 a barrel.
• Gold– Gold prices jumped to another record high on interest rate cut expectations. Spot Gold was up 0.5% to $2,170.55 per ounce and was on track for a second straight weekly rise. U.S. gold futures settled 0.9% higher to $2,185.50.
• U.S. Dollar– The dollar traded modestly weaker against most major peers and was on pace for its worst weekly showing against the euro this year. The dollar was 0.68% lower against the yen, its weakest since Feb. 2.
• U.S. Treasury Rates– The yield on the 10-year Treasury was almost flat after the February jobs report showed solid employment growth but also an increase in the unemployment rate. The yield on the 10-year Treasury note was near 1 basis point lower at 4.079%.
• Asian shares were down in overnight trading.
• European markets are trading lower.
• Domestic markets are indicated to open in the red this morning.

Earnings season is effectively over with 99% of S&P 500 companies reporting. Of those companies, 73% of companies have beat earnings estimates culminating in a 3.4% year-over-year growth rate. Additionally, 64% have beat revenue estimates culminating in a slightly better-than-expected earnings season, with year-over-year revenue growth pf 3.5%, the fourteenth consecutive quarter of positive revenue growth (Source: Factset).

This week will feature February’s CPI and PPI reports. Neither inflation report is likely to move the needle for the Fed’s March meeting but will be a key data point for upcoming meetings in May and June.

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.