Last week, the stock market was a whirlwind of activity recently, with the S&P 500 reaching a new high and sectors showing varied performances. Let’s dive into the details and understand what’s been happening in the world of stocks, bonds, and economic data.
Last Week’s Market Overview
The S&P 500’s Impressive Climb
- New Record High: The S&P 500 hit a fresh record high of 4,839.81, marking a 1.5% increase for the year.
- Sector Performance: The information technology sector led the gains, jumping 4.3%, while utilities and real estate sectors experienced declines.
Mega Cap and Semiconductor Stocks Shine
- NVIDIA’s Remarkable Gain: NVIDIA (NVDA) stood out with an 8.7% gain.
- Semiconductor Index Leap: The PHLX Semiconductor Index jumped a notable 8.0% this week.
Bonds and Interest Rates: A Shift in Expectations
- Yield Increases: The 2-yr note yield rose to 4.41%, and the 10-yr note yield climbed to 4.15%.
- Fed’s Rate Cut Outlook: Fed Governor Waller hinted at possible rate cuts, but less than the market anticipates.
Economic Data: A Mixed Bag
- Home Sales: December home sales had their worst year since 1995, with volumes 6.2% lower than the previous year. Inventory also fell by 11.5% from November to December.
- Consumer Sentiment: Surged to 78.8 in January, the highest since July 2021, boosted by lower gasoline prices and stock market gains.
- Retail Sales: Grew by 0.6% in December, surpassing expectations and highlighting the resilience of the U.S. consumer.
- Manufacturing Index: The Empire State manufacturing index plummeted to -43.7, a significant drop indicating a slowdown in manufacturing activity.
- Jobless Claims: Fell to 187,000, the lowest since September 2022, with continuing claims also below expectations.
Political and Corporate Movements
- Trump’s Iowa Caucus Win: Trump secured a landslide victory in the Iowa Caucus, with DeSantis and Haley following.
- Retail Layoffs: Accelerating layoffs with Wayfair and Macy’s announcing significant workforce reductions.
- Synopsys-Ansys Acquisition: A major $35 billion deal is expected to close in the first half of 2025.
- Jetblue-Spirit Merger Blocked: A federal judge blocks the merger, causing a significant drop in $SAVE shares.
Implications for Investors
- Navigating Rate Expectations: Investors need to recalibrate their expectations regarding the Fed’s rate cuts.
- Sector-Specific Strategies: Focusing on sectors like technology could be beneficial, given their recent performance.
- Long-Term Outlook: Despite short-term fluctuations, the overall market trend and economic data suggest a cautiously optimistic approach.
Commodities & Crypto
OIL & Energy
Oil prices have seen a modest uptick this week, but they’re still hovering below the $80 mark per barrel. It’s like they’re stuck in a rut, unable to break free. The Red Sea region remains a hotspot, with the U.S. intensifying its strikes against the Houthis in Yemen. This geopolitical tension, however, hasn’t given the expected boost to oil prices.
The International Energy Agency (IEA) isn’t helping the mood either. Their latest report paints a rather gloomy picture, suggesting that the oil market will remain well-supplied this year. This is especially true if OPEC+ sticks to its guns with production cuts. But here’s a twist: the IEA has upped its forecast for global demand growth, expecting an increase of 1.24 million barrels per day (mbpd) in 2024. That’s slower than 2023’s growth of 2.25 mbpd, but it’s still significant.
In terms of hard numbers, Brent crude is trading around $78.50, while WTI is a bit lower at about $73.60. Over in the natural gas sector, prices are on a downward trend, with the European benchmark at the Rotterdam TTF falling to 28 EUR/MWh.
Gold & Metals
The industrial metals market isn’t faring much better. Copper, aluminum, and zinc are all on a downward trajectory. Copper, for instance, has dipped to nearly $8,200 per tonne in London. Aluminum and zinc aren’t immune either, with prices falling to $2,130 and $2,440 respectively.
The root cause? Look no further than China. The economic giant’s performance has been a mixed bag. Its annual GDP growth hit 5.2% in 2023, which sounds good until you realize that economists were expecting more. This uncertainty is casting a shadow over the metals market.
Gold, usually a safe haven in turbulent times, is also losing its luster. The rebound in bond yields is partly to blame, with an ounce of gold trading around $2035.
Crypto
Cryptocurrencies, always the wild card, continue to surprise. Bitcoin, the flagship crypto, is down 1% since Monday, hovering close to $41,000. Ether, on the other hand, is showing some resilience, climbing 1% back to the $2,500 mark.
The crypto market’s recent dynamics are intriguing. Despite the U.S. approving 11 Bitcoin Spot ETFs last week and transaction volumes soaring past $10 billion, Bitcoin seems to be treading water. It’s a classic case of “buy the rumor, sell the news.” The anticipation of these ETFs had already fueled Bitcoin’s price surge in 2023, especially when BlackRock entered the scene last June. But now, with the event actualized, the excitement seems to have fizzled out.
CALENDAR & MOVERS
The upcoming week in the tech and finance sectors is shaping up to be nothing short of exhilarating. With a spotlight on the tech sector, particularly chip stocks like Nvidia (NVDA), AMD (AMD), Broadcom (AVGO), Arm Holdings (ARM), and Micron Technology (MU), the market is buzzing after some sizzling sessions.
But that’s just the tip of the iceberg. Let’s dive into the key events and earnings that are set to shape the financial landscape in the days ahead.
Economic Indicators: A Close Watch
Next week’s focus will be on crucial growth indicators. The preliminary Q4 GDP reading in the U.S. and the global flash PMIs are on the radar, promising to give us a clearer picture of the economic landscape.
But wait, there’s more! Central banks around the globe, including the Bank of Japan, the European Central Bank, and the Bank of Canada, are gearing up for monetary policy statements and interest rate decisions.
Meanwhile, in the U.S., Federal Reserve members will enter a blackout period, refraining from public talks ahead of the next FOMC meeting on January 30-31. Talk about a suspenseful buildup!
Earnings Galore: A Busy Calendar
Hold onto your hats, because the earnings calendar is jam-packed! We’re talking about big names like Tesla (NASDAQ: TSLA), Netflix (NASDAQ: NFLX), Visa (V), and American Airlines Group (AAL), all set to report their latest figures. Let’s break it down day by day:
- Monday, January 22: Earnings spotlight shines on Brown & Brown (BRO), United Airlines Holdings (UAL), and Zions Bancorporation (ZION).
- Tuesday, January 23: A busy day with Johnson & Johnson (JNJ), Procter & Gamble (PG), Netflix (NFLX), Verizon Communications (VZ), Texas Instruments (TXN), General Electric (GE), and Lockheed Martin (LMT).
- Wednesday, January 24: The stage is set for Tesla (TSLA), Abbott Laboratories (ABT), IBM (IBM), AT&T (T), General Dynamics (GD), Las Vegas Sands (LVS), and CSX (CSX).
- Thursday, January 25: Eyes will be on Visa (V), Intel (INTC), Comcast (CMCSA), Union Pacific (UNP), American Airlines Group (AAL), Southwest Airlines (LUV), Levi Strauss (LEVI), and Alaska Air Group (ALK).
- Friday, January 26: Wrapping up the week are American Express (AXP), Colgate-Palmolive (CL), Norfolk Southern (NSC), and Autoliv (ALV).
Dividends: Who’s Upping the Ante?
In the realm of dividends, several companies are forecasted to increase their quarterly payouts. Here’s a quick rundown:
- Nexstar Media (NXST): Expected to jump to $1.54 from $1.35.
- Elevance Health (ELV): Anticipated to rise to $1.67 from $1.48.
- Blackstone (BX): Forecasted to climb to $0.90 from $0.80.
- Franklin Electric (FELE): Likely to increase to $0.25 from $0.225.
- Comcast (CMCSA): Set to grow to $0.31 from $0.29.
Analysis and Insights
As we gear up for this whirlwind week, there are a few key points to keep in mind:
- Tech Sector’s Momentum: The strength in chip stocks is a significant indicator of the tech sector’s robustness. Keep an eye on how Nvidia, AMD, Broadcom, Arm Holdings, and Micron Technology perform post-earnings.
- Economic Indicators: The Q4 GDP reading and global flash PMIs will provide valuable insights into the economic health both domestically and globally. These indicators could sway market sentiments significantly.
- Central Banks’ Moves: The decisions by major central banks could introduce new dynamics in the financial markets, especially in terms of interest rates and monetary policies.
- Earnings Reports: With a diverse range of companies reporting, from tech giants to airlines, these earnings will offer a comprehensive view of the corporate sector’s health amidst ongoing economic challenges.
In conclusion, the week ahead is packed with potential market-moving events and earnings reports.
