Last Week on Wall Street

Last Week on WallStreet - February 10th, 2024

S&P 500: +1.37% DOW: +0.04% NASDAQ: +2.31% 10-YR Yield: 4.19%

What Happened?

Upward momentum in the equity market persisted this week, propelling the S&P 500 to a historic close above 5,000 and marking its fifth consecutive week of gains. In a week relatively light in economic data releases, earnings took the spotlight. Overall, the earnings season has surpassed expectations, with approximately 81% of reporting companies beating analyst predictions, exceeding the long-term average of 67%. Noteworthy companies, including Eli Lilly, Disney, and Cloudflare, contributed to the positive trend by delivering stellar results. The prevalence of upside surprises in earnings further fueled the ongoing rally, adding optimism to the already positive economic and inflationary landscape. Friday's release of annual CPI revisions supported the current disinflationary trend without altering the market's outlook on inflation. Investor attention now shifts to next week's reports on January CPI and Retail Sales, anticipating additional insights into the direction of inflation and the overall economy.

Beneath the surface, Technology (+2.7%) names reasserted their dominance as the mega-cap names in the sector forced markets higher. Discretionary (+1.5%) and Healthcare (+1.4%) followed behind. Utilities (-2.0%) struggled due to elevating interest rates.


Jeffry Bartash - MarketWatch

Economy Perks Up Early in the New Year, ISM Finds, as Looming Interest-Rate Cuts Fuel Optimism

  • The Institute for Supply Management’s survey climbed to 53.4% from 50.5% in the prior month
    • The index had fallen in December to a seven-month low
  • The new-orders index rose 2.2 points to 55.0% while the employment barometer rebounded to 50.5%
  • The prices-paid index, a measure of inflation, jumped 7.3 points to 64.0% to a 14-month high

The key takeaway - According to the ISM's survey of service sector business, which constitutes a significant portion of overall economic activity, the economic resilience observed throughout 2023 and into 2024 persists. Although the discouraging data from December raised some concerns about the health of the services sector as the new year began, this latest report provides little cause for worry. New orders, a key indicator of demand, remain firmly in expansionary territory, and the employment outlook for businesses has returned to a solid footing. Anticipations of the Federal Reserve easing policy restrictions by mid-year have instilled optimism among businesses, signaling a potential relaxation of economic constraints. However, a notable concern arises from the prices paid index, indicating a reacceleration in inflation. Such a scenario could pose challenges for the Fed, especially if businesses experience pressure from suppliers and subsequently pass on these increased costs to customers. This dynamic may result in a more stubborn inflationary trend than initially expected.


Mixed US Consumer Price Revisions Leave Slowing Inflation Trend Intact

  • Following corrections to the data, The consumer price index rose 0.2% in December instead of 0.3% as reported
  • Data for November was revised up to show the CPI increasing 0.2% rather than 0.1% as previously estimated
  • Excluding food and energy, core inflation was revised down for December and slightly upward in November
  • The increase in services excluding rents was revised lower in November and December

The key takeaway - Following Federal Reserve Governor Christopher Waller's emphasis on seasonal revisions for CPI as a factor in shaping his views on policy adjustments, markets have anxiously awaited their release. Concerns, shared by Waller and others, were rooted in the possibility of a recurrence of last year's scenario, where inflation turned out to be higher than initially reported. However, the recently unveiled revisions did not reveal any significant changes that would suggest a monumental shift in reported inflation over the past few months or alter expectations for its trajectory in the future. The prevailing indicators continue to support the notion of an ongoing disinflationary trend. While the road ahead may be more difficult that the road so far, there is evident progress in addressing inflation. Markets now look towards next week's January CPI report to kick off the inflation narrative of 2024.


Jeff Cox - CNBC

Jobless Claims Fall to 218,000 and Show Layoffs Still Very Low

  • The number of Americans who applied for unemployment benefits in the first week of February fell by 9,000 to 218,000
  • New jobless claims fell in 42 of the 53 states and territories that report these figures
  • The number of people collecting unemployment benefits in the U.S., meanwhile, dropped by 23,000 to 1.87 million

The key takeaway - While jobless claims may not wield significant influence on a weekly basis, their trends offer valuable insights into the potential trajectory of the job market. Current indicators suggest that the labor market remains robust and tight compared to historical averages. Despite this resilience, there are emerging signs of potential easing. Employers have been proactive in retaining their workforce, and aside from a few notable cases, layoffs have been relatively infrequent. However, recent upward trend in continuing jobless claims suggests a deceleration in hiring, indicating that individuals are struggling to find new employment opportunities. In this economic landscape where the consumer dictates all, a strong market supporting spending implies little immediate indication of a slowdown. Nevertheless, other factors, such as consumer credit and personal balance sheets, could pose threats to consumers in the medium term.


From Around the Watercooler

Mexico officially surpassed China as the top exporter to the US last year for the first time in 20 years

Disney blew past expectations for its quarterly earnings and cut its streaming losses announced a new $1.5 billion stake in Fortnite maker Epic Games

Uber reported its first annual profit since going public in 2019

Fox, Warner Bros. Discovery, and Disney’s ESPN plan to join forces to create a new sports streaming service