The major averages were all up for the holiday shortened trading week, with the S&P 500 closing at a new all-time high on Friday, beating its last record set in January 2022.
The week’s biggest winner, however, was the tech-heavy Nasdaq, which gained more than 2%. The Magnificent Seven (Amazon, Alphabet, Apple, Meta Platforms, Microsoft, Nvidia, Tesla) led the way, with Nvidia jumping 8.74% for the week, and Apple up 3.03% following a big upgrade by Bank of America.
After two consecutive winning weeks, all three averages are in now in the black for 2024.
Within the portfolio, we heard from Morgan Stanley, which despite producing better-than-expected results came under pressure as management struck a cautious tone. The bank’s wealth management business is not quite matching buy side expectations, even as it beat the sell side consensus estimate.
On the macroeconomic front, a hotter-than-expected retail sales number on Wednesday put pressure on stocks as investors were forced to reconsider estimates on how many rate cuts the Federal Reserve might do this year.
We are at a weird moment in terms of the data. On the one hand, we don’t want to see numbers so strong that it takes the need for rate cuts off the table. On the other, strong data speaks to economic resiliency, which is in turn a great backdrop for business operations. As a result, the investors are looking for data that is strong enough to support sales and earnings growth while keeping unemployment low (good for business fundamentals). But also we want data that shows continued disinflation that allows the Fed room to cut rates (a positive for equity valuations). Fortunately, we’ll get useful information in the coming weeks as earnings season ramps up and updated inflation data is released.
Housing inflation is proving a tougher nut to crack. This week, we learned that though housing starts and building permits were stronger than expected, single-family housing starts were down 8.6% monthly in December….
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