Market Recap - RATE CUT ENTHUSIASM DRIVES STRONG GAINS

The Stock Market Had A Strong Showing This Week, Which Drove The Three Major Indices To Fresh Record Highs.

The S&P 500 for its part closed above 5,200 for the first time with a 2.3% gain this week. The Nasdaq Composite jumped 2.9% and the Dow Jones Industrial Average gained 2.0%.

The gains were largely in response to the FOMC policy announcement. The committee voted unanimously to leave the target range for the fed funds rate unchanged at 5.25-5.50%. This was expected and was not the reason for increased buying activity.

Buying increased due to the closely-watched dot plot, which is included in the updated Summary of Economic Projections (SEP), showing that the Fed still anticipates three rate cuts this year despite recent inflation readings coming in hotter than expected.

Fed Chair Powell's press conference following the FOMC policy announcement didn't deter the influx of buying. He largely reiterated prior comments, indicating that the Fed needs more evidence that inflation is moving toward the 2% target before cutting rates. Mr. Powell also said that it will be appropriate to slow the pace of asset runoff fairly soon.

Rate cut expectations moved up this week, contributing to the positive bias in the stock market. The implied likelihood of a June cut rose to 75.4% from 58.8% last week, according to the CME FedWatch Tool.

The price action in Treasuries also contributed to the positive bias in the stock market. The 2-yr note yield declined 12 basis point to 4.60% and the 10-yr note yield fell eight basis points to 4.22%.

Mega cap stocks had an outsized impact on index gains.

Only one of the S&P 500 sectors logged a decline -- real estate (-0.4%) -- while the communication services (+4.8%), industrials (+2.9%), information technology (+2.9%), and consumer discretionary (+2.8%) sectors saw the largest gains. 

• S&P 500: +2.3% for the week / +9.7% YTD

• Nasdaq Composite: +2.9% for the week / +9.4% YTD

• S&P Midcap 400: +2.3% for the week / +7.5% YTD

• Dow Jones Industrial Average: +2.0% for the week / +4.7% YTD

• Russell 2000: +1.6% for the week / +2.2% YTD

Market Recap - Hot Inflation Data and Consolidation Efforts Lead to Losses

The Major Indices Settled With Relatively Modest Declines This Week.

Market participants received two inflation readings suggesting price pressures remain stubborn. Both the Consumer Price Index (CPI) and Producer Price Index (PPI) for February came in hotter than expected, but stocks seemed to large take this in stride.

The S&P 500 even reached a new record high on Tuesday following the hot CPI reading. This report didn't spook the market due to the notion that the largest factor in the increase -- the index for shelter -- will lessen in coming months. 

The relatively muted response in the stock market was due also to the notion that the Fed's policy decision on Wednesday may provide more clarity on how these reports factor into the Fed's thinking.

The Treasury market had a more pronounced response to the data. The 10-yr note yield jumped 21 basis points this week to 4.30% and the 2-yr note yield settled 23 basis points higher at 4.72%.

Other data this week included a February retail sales report that was a bit weaker than expected but still up nicely versus the prior month, and some initial and continuing jobless claims data that reflected ongoing strength in the labor market.

The modestly negative bias in the stock market was also related to a growing sense among some participants that stocks are due for a pullback.

Six of the 11 S&P 500 sectors logged declines. The rate-sensitive real estate sector was the worst performer by a decent margin, dropping 3.1%. The consumer discretionary sector was the next worst performer, declining 1.2%. Meanwhile, the energy sector saw the largest gain, jumping 3.7% and the materials sector registered a 1.5% gain. 

• S&P 500: -0.1% for the week / +7.3% YTD

• Nasdaq Composite: -0.7% for the week / +6.4% YTD

• S&P Midcap 400: +1.0% for the week / +5.1% YTD

• Dow Jones Industrial Average: UNCH for the week / +2.7% YTD

• Russell 2000: -2.1% for the week / +0.6% YTD

Market Recap - BUSY WEEK BRINGS MIXED PRICE ACTION

It Was A Busy Week In Terms Of Market-Moving Events And Price Action At The Index Level.

This buying left the Nasdaq Composite at a fresh all-time high by the end of the week. 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.

Market participants received earnings results from retailers like Target (TGT) and Costco (COST), and earnings from Broadcom (AVGO). 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%.

• S&P 500: -0.3% for the week / +7.4% YTD

• Nasdaq Composite: -1.2% for the week / +7.2% YTD

• S&P Midcap 400: +1.4% for the week / +6.1% YTD

• Dow Jones Industrial Average: -0.9% for the week / +2.7% YTD

• Russell 2000: +0.3% for the week / +2.7% YTD

Market Recap - WINNING WEEK LEAVES NASDAQ AT RECORD HIGH

This buying left the Nasdaq Composite at a fresh all-time high by the end of the week. 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 gains this 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 sector to lose ground was 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 this 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 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. Also, New York Community Bancorp acknowledged that it has identified material weaknesses in the company's internal controls related to internal loan review.

• Nasdaq Composite: +1.7% for the week / +8.4% YTD

• S&P 500: +1.0% for the week / +7.7% YTD

• S&P Midcap 400: +1.8% for the week / +4.6% YTD

• Dow Jones Industrial Average: -0.1% for the week / +3.7% YTD

• Russell 2000: +3.0% for the week / +2.4% YTD

Market Recap - S&P 500, DJIA HIT RECORD HIGHS AGAIN AFTER NVDA EARNINGS

The S&P 500 And Dow Jones Industrial Average Pushed Further Into Record Territory This Week And The Nasdaq Composite Shifted Back Into Rally-Mode.

Most of the action over this holiday-shortened week occurred on Thursday as participants reacted to another blowout quarter from NVIDIA (NVDA). NVIDIA's report renewed the market's enthusiasm for AI-related stocks, other growth stocks, and semiconductor shares.

NVDA surged 8.5% this week, topping a $2 trillion market-cap for the first time, and leaving its gain this year just below 60%. The PHLX Semiconductor Index (SOX) jumped 1.9%.

A fear of missing out on further gains was a powerful directional driver this week that added to the post-NVDA earnings rally. Even on Friday, when growth stocks and semiconductor shares underperformed, the broader market finished with a positive bias.

Notably, the information technology sector (+2.0%) was the second biggest gainer this week despite the jump in NVDA shares, trailing only the consumer staples sector (+2.1%). All 11 S&P 500 sectors registered gains this week, but the energy (+0.4%) and real estate (+0.9%) sectors still lagged index performance by a decent margin.

The market drew added support from ongoing optimism about rate cuts following comments from Fed officials. Fed Vice Chair Jefferson, who said this morning that it will likely be appropriate to begin cutting rates later this year, adding that he is cautiously optimistic about the way inflation is evolving. Also, Philadelphia Fed President Harker (not an FOMC voter) said he believes the Fed may be in a position to see the fed funds rate decrease this year, but cautions anyone looking for it right now and right away.

Market participants were also digesting the minutes for the January 30-31 FOMC meeting, which were scripted largely as expected. Fed Chair Powell effectively "wrote them" for the market when he conducted his press conference following that January meeting, and several Fed officials in the interim have paraphrased them.

The 10-yr note yield fell four basis points this week to 4.26% and the 2-yr note yield rose seven basis points to 4.72%. 

• S&P 500: +1.7% for the week / +6.7% YTD

• Nasdaq Composite: +1.4% for the week / +6.6% YTD

• Dow Jones Industrial Average: +1.3% for the week / +3.8% YTD

• S&P Midcap 400: +1.1% for the week / +2.8% YTD

• Russell 2000: -0.8% for the week / -0.5% YTD

Market Recap - MARKET STRUGGLES FOR DIRECTION AFTER SLATE OF ECONOMIC NEWS

The Stock Market Experienced Mixed Price Action This Week.

Tuesday's trade featured a broad, sharp retreat in response to a hotter than expected CPI (actual 0.3%; Briefing.com consensus 0.2%) and core CPI (actual 0.4%; Briefing.com consensus 0.3%) for January, which also sent Treasury yields sharply higher. By the end of the week, however, the major indices managed to win back a lot of that lost ground.

The Russell 2000, for example, sank 4% on Tuesday, but ultimately settled 1.1% higher on the week. The market-cap weighted S&P 500 declined 0.4% this week, but the equal-weighted S&P 500 jumped 0.7%. 

Only four of the 11 S&P 500 sectors closed lower than Friday while five of them climbed more than 1%. The heavily-weighted information technology sector saw the sharpest drop, down 2.5%, followed by the communication services sector, which fell 1.6%. On the flip side, the materials (+2.4%) and energy (+2.2%) sectors saw the biggest gains.

The stock market was not spooked by this week's slate economic data, holding onto to hope that inflation will continue to go the market's way, that the macroenvironment will remain strong, and that the Fed will cut rates sooner rather than later.

In addition to the hot CPI reading, market participants also digested a below-consensus Retail Sales report for January, an unexpected drop in jobless claims to 212,000, and a hotter-than-expected PPI report for January. The 2-yr note yield settled 15 basis points higher this week to 4.65% in response to this week's data and the 10-yr note yield rose 11 basis points this week to 4.30%.

Coming into the week, there was a growing sense among some participants that stocks were overbought in the short-term and due for some consolidation. The market has been on a huge run since late October that had the S&P 500 and Dow Jones Industrial Average near all-time highs coming into the week. 

The move off late-October lows has been paced by gains in the mega cap space, so it makes sense that some mega caps suffered outsized losses this week due to profit-taking activity. Amazon.com and Microsoft were losing standouts in the mega cap space, dropping 2.8% and 3.9%, respectively, this week. AMZN and MSFT and still up 11.6% and 7.5% in 2024. 

• Nasdaq Composite: -1.3% for the week / +5.1% YTD

• S&P 500: -0.4% for the week / +4.9% YTD

• Dow Jones Industrial Average: -0.1% for the week / +2.5% YTD

• S&P Midcap 400: +0.7% for the week / +1.7% YTD

• Russell 2000: +1.1% for the week / +0.3% YTD

Market Recap - SEMICONDUCTOR STOCKS LEAD MARKET HIGHER, AGAIN

It Was Another Winning Week For The Stock Market. Small Cap Stocks Saw Some Rebound Action After Underperforming To Start The Year.

The Russell 2000 jumped 2.4% this week. The S&P 500 closed above 5,000 for the first time, drawing support from gains in the mega cap and semiconductor spaces. The PHLX Semiconductor Index (SOX) rose 5.3%. 

Many stocks participated, though, in a relatively broad advance. The equal-weighted S&P 500 gained 0.5% this week. There still has not been any concerted selling interest despite reports that the market is overbought in the short-term, which has acted as its own upside catalyst.

Another catalyst for the upside price action came in the form of positive responses to some earnings news. Ford,  Eli Lilly, DuPont, Arm Holdings, and Walt Disney were among the standout earnings-related winners this week.

Meanwhile, Amgen and PayPal were some of the more influential earnings-related laggards. 

Notably, this week's broad advance occurred despite sharp declines in Treasuries. The 2-yr note yield rose 12 basis points to 4.50% and the 10-yr note yield rose 16 basis points to 4.19%. 

The increased selling in Treasuries started last week in response to ongoing strength in economic data of late that has the market repricing rate cut expectations. This also followed comments from Fed Chair Jerome Powell last weekend, who said on 60 Minutes that the Fed needs to see more evidence that inflation is moving sustainably down to its 2% target before lowering rates.

This week's release of the January ISM Services PMI featured an acceleration in services sector activity in January, replete with a pickup in new orders, employment, and prices. The weekly jobless claims report showed a decrease in the number of claims.

Also, the annual CPI revisions were released this week, garnering added attention due to potential implications for the Fed's rate cut path. The revisions were relatively friendly since they did not alter the market's view on inflation much.

Treasuries did not respond favorably to this week's slate of strong auctions, including a $25 billion 30-yr bond offering, a $54 billion 3-yr note sale, and $42 billion 10-yr note auction.

The probability of a 25 basis points rate cut to 5.00-5.25% at the May FOMC meeting is 63.1% now, down from 73.2% one week ago, according to the CME FedWatch Tool.

• Nasdaq Composite: +2.3% for the week / +6.5% YTD

• S&P 500: +1.4% for the week / +5.4% YTD

• Dow Jones Industrial Average: +0.04% for the week / +2.6% YTD

• S&P Midcap 400: +1.5% for the week / +1.0% YTD

• Russell 2000: +2.4% for the week / -0.8% YTD

Market Recap - GAINS BROADEN OUT AS EARNINGS SEASON ROLLS ON

The Stock Market Logged Gains This Week, Which Brought The S&P 500 To Fresh Record Highs.

Gains were more broad based compared to last week, which featured the outperformance of mega cap stocks. The market-cap weighted S&P 500 climbed 1.1% this week.

The broadening out of buying activity left eight of the 11 S&P 500 sectors higher this 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% this 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 this 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. The PHLX Semiconductor Index dropped 0.8% this week.

Companies that received positive reactions to earnings results and/or guidance included Netflix, United Airlines, Verizon, and Procter & Gamble.

This 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% (Briefing.com 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 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.

Treasuries settled little changed from last Friday following the pleasing economic releases. The 10-yr note yield settled one basis point higher at 4.16% and the 2-yr note yield dropped five basis points this week to 4.36%. This price action followed Wednesday's $61 billion 5-yr note auction, which met poor demand, and Tuesday's strong $60 billion 2-yr note sale. 

In other news, the People's Bank of China cut its required reserve ratio for commercial banks by a 50 basis points.

• Nasdaq Composite: +0.9% for the week / +3.0% YTD

• S&P 500: +1.1% for the week / +2.5% YTD

• Dow Jones Industrial Average: +0.7% for the week / +1.1% YTD

• S&P Midcap 400: +0.8% for the week / -0.6% YTD

• Russell 2000: +1.8% for the week / -2.4% YTD

Market Recap - S&P 500 HITS FRESH RECORD HIGH ON STRONG MEGA CAP AND SEMICONDUCTOR SHARES

This Abbreviated Week Closed On A Strong Note. The S&P 500 Is Sitting At A Fresh Record High (4,839.81) And Is Up 1.5% For The Year.

The Nasdaq Composite is up 2.0% for the year thanks to this week's gain and the Dow Jones Industrial Average is up 0.5%.

Gains were largely driven by outperforming mega cap and semiconductor shares. The PHLX Semiconductor Index jumped 8.0% this week. NVIDIA was a standout winner, registering a 8.7% gain. 

The broader market saw softer price action due to rising market rates as participants recalibrated rate cut expectations due to comments from some Fed officials and more strong economic data that is not likely to persuade the Fed to cut rates as soon, or as much, as the market hoped. The 2-yr note yield jumped 26 basis points to 4.41% and the 10-yr note yield climbed 20 basis points to 4.15%.

Fed Governor Waller (FOMC voter) indicated that the Fed could begin cutting rates this year, but reiterated the Fed's estimate for three cuts rather than six cuts that the market expects.

The December Retail Sales report, the Housing Starts data for December, and weekly initial jobless claims were all stronger than expected and the preliminary reading of the University of Michigan's Consumer Sentiment Index for January was well ahead of estimates, hitting its highest level since July 2021 with year-ahead inflation expectations decelerating to 2.9% from 3.1%, a rate not seen in just over three years.

The implied likelihood of a 25-bps cut at the March FOMC meeting now sits at 45.4% versus 81.0% last Friday.

Market participants were also digesting more earnings results from the likes of Goldman Sachs, Morgan Stanley, and Dow component Travelers, which garnered mixed reactions. 

Five of the 11 S&P 500 sectors registered gains this week. The heavily-weighted information technology sector was the top gainer by a wide margin, jumping 4.3% thanks to the strength in NVDA and its other mega cap components. Meanwhile, the rate-sensitive utilities (-3.7%) and real estate (-2.1%) sectors saw some of the largest declines.

• Nasdaq Composite: +2.3% for the week / +2.0% YTD

• S&P 500: +1.2% for the week / +1.5% YTD

• Dow Jones Industrial Average: +0.7% for the week / -0.5% YTD

• S&P Midcap 400: +0.5% for the week / -1.5% YTD

• Russell 2000: -0.3% for the week / -4.1% YTD

Market Recap - BUSY WEEK ENDS WITH GAINS

The Stock Market Closed Higher, Which Marks Its Tenth Week Of Gains In 11 Weeks.

The S&P 500, which briefly traded above its all-time high close on Friday, recovered all of last week's losses, leaving the index up 0.3% for the year.

Strength in mega cap stocks had an outsized impact on index performance.

The best performing S&P 500 sectors all house mega cap constituents. The information technology (+4.9%), communication services (+3.4%), and consumer discretionary (+1.5%) sectors saw the largest gains on the week. Meanwhile, the energy sector logged the steepest decline (-2.4%).

The financial sector was another underperformer, closing down 0.5% for the week. On a related note, the Q4 earnings reporting period started on Friday and included results from Bank of America, and Wells Fargo, JPMorgan Chase, and Citigroup. 

Dow component UnitedHealth and Delta Air Lines were also among the notable names that reported earnings. Overall, quarterly results were met with negative reactions and set a tepid tone as participants look ahead to upcoming earnings results. Also, Microchip Technology issued a Q4 revenue warning that was tied to a weakening economic environment.

In other corporate news, Boeing sank 12.6% this week after 737 MAX 9 jets were grounded in response to a fuselage blowout on an Alaska Airlines flight.

This week's economic data painted a somewhat mixed picture. The Consumer Price Index (CPI) report for December was slightly hotter than the market's hopeful expectations and weekly initial jobless claims remain below recession-like levels. Meanwhile, the Producer Price Index was cooler than expected. 

Market participants recalibrated rate cut expectations despite the generally mixed economic data, suggesting the market doesn't believe inflation is likely to reaccelerate. The fed funds futures market now sees a 79.4% probability of a 25 basis points rate cut at the March FOMC meeting versus a 73.2% probability yesterday and a 68.1% probability one week ago.

The price action in the Treasury market reflected this recalibration. The 2-yr note yield, which is most sensitive to changes in the fed funds rate, sank 24 basis points to 4.15%. The 10-yr note yield fell nine basis points this week to 3.95%. 

In other news, geopolitical angst was piqued after the United States and the UK conducted strikes against military targets in Houthi-controlled areas of Yemen.

• S&P 500: +1.8% for the week / +0.3% YTD

• Nasdaq Composite: +3.1% for the week / -0.3% YTD

• Dow Jones Industrial Average: +0.3% for the week / -0.3% YTD

• S&P Midcap 400: +0.6% for the week / -1.9% YTD

• Russell 2000: UNCH for the week / -3.8% YTD