| | Good morning, | Last week was marked by noteworthy economic shifts and corporate shake-ups, and the financial world has been abuzz with activity. Key highlights include the Federal Reserve’s preferred inflation gauge falling below 3% for the first time in nearly two years, signaling a potential easing of inflationary pressures. | Meanwhile, the tech giant Microsoft announced substantial layoffs in its gaming division, reflecting broader industry trends. These developments, alongside other major global market movements, paint a complex picture of the current economic landscape. | Are you interested in the daily market newsletter? Click here to sign up for the Free Market Briefing Newsletter. | Have a great week, | Irving Wilkinson, Editor | AlphaBetaStock.com | | Table of Contents (Opens On Main Site) | Table of Contents | | LAST WEEK’S MARKET OVERVIEW |
|
| | S&P 500 Sectors: A Mixed Bag Of Performances | This week, the stock market witnessed a notable climb, pushing the S&P 500 to new record highs. The gains were more evenly spread than the previous week’s mega-cap stock dominance. The S&P 500 rose 1.1%, mirrored by the Invesco S&P 500 Equal Weight ETF (RSP). Eight of the 11 S&P 500 sectors finished the week on a high note. | Energy Sector: Led the charge with a significant 5.2% jump. Communication Services Sector: Followed closely, gaining 4.5%. Laggards: Consumer discretionary, real estate and healthcare sectors dipped, with consumer discretionary notably impacted by Tesla’s (TSLA) 13.6% drop after disappointing earnings.
| Bonds And Interest Rates: A Steady Scene | | Treasuries remained relatively unchanged. The 10-year note yield edged slightly higher to 4.16%, while the 2-year note yield fell to 4.36%. The bond market reacted variably to different Treasury note auctions, with a poor response to the 5-year note auction contrasting with a strong 2-year note sale. | Inflation And Economic Growth: A Positive Outlook | Fed’s Preferred Inflation Gauge: The PCE index grew by 2.6% year-over-year in December, marking a significant milestone as it fell below 3% for the first time since March 2021. The core-PCE, a more focused measure, grew 2.9%, down from the previous 3.2% and below the 3.0% estimate. This is a clear indication of cooling inflation. U.S. Economic Growth: The economy expanded at a robust 3.3% pace in Q4, surpassing the 2% estimate. This growth was fueled by a 3.3% increase in government spending and a 2.8% rise in consumer expenditures, signaling strong economic momentum.
| Market Dynamics And Business Activity | S&P Composite PMI: Business activity picked up in January, with the Composite PMI reaching 52.3, the highest since last June and an increase from December’s 50.9. This suggests a resurgence in business confidence and activity. New Home Sales: Sales surged by 8% in December, buoyed by a drop in mortgage rates. The median sales price of new single-family homes fell to $413,200, continuing a four-month downward trend.
| Corporate Movements And Layoffs | Microsoft’s Layoffs: In a significant move, Microsoft laid off 1,900 workers from its gaming division after the Activision acquisition. This trend was mirrored by other companies like SAP, HubSpot, eBay, Levi Strauss, and Polestar announcing their own layoffs. Sunoco and NuStar Energy Deal: Sunoco plans to acquire NuStar Energy in a $7.3 billion all-stock deal, expected to close in Q2’24. NuStar’s investors will receive 0.4 shares of Sunoco for each share they own. Amer Sports IPO: Targeting an $8.7 billion valuation, Amer Sports aims to raise $1.8 billion in its IPO. The company owns renowned brands like Wilson, Salomon, Atomic, and Arc’teryx.
| Global Market Highlights | Bank of Japan: Retains its ultra-loose monetary policy, keeping interest rates at -0.1% and aiming for a 2% inflation target. European Central Bank: Holds rates steady, with no hints at cuts despite progress on inflation. Markets anticipate a total rate increase of about 1.5% for the year. Apple in Europe: Overhauls iOS and App Store rules in response to EU anti-trust concerns, allowing third-party app downloads and alternative payment systems. Apple’s Success in China: Takes the top spot in China’s smartphone market with a 17.3% share, while Huawei makes a comeback. China’s Market Support: Considers a 2 trillion yuan rescue package to bolster its stock markets, leading to a 7% rise in the Hang Seng Index. Alibaba’s Share Purchase: Co-founders buy $200 million in shares, boosting the company’s stock by 10%. Putin’s War Stance: Signals are interested in discussing an end to the war, though U.S. officials remain skeptical. Turkey and Sweden’s NATO Bid: Turkey approves Sweden’s NATO membership, moving Sweden closer to joining the alliance.
| Key Takeaways For Investors | Inflation and Growth Trends: The cooling inflation and robust economic growth are positive signs for market stability. Real Estate Market: The surge in new home sales and price drop could indicate a shift in the housing market dynamics. Corporate Downsizing: The wave of layoffs across major corporations signals a cautious approach in the current economic climate. Global Policy Moves: Decisions by major central banks and geopolitical developments can have far-reaching impacts on global markets.
| | OIL & Energy | | | | | Whoa, talk about a boost in the energy sector! Brent crude oil has impressively broken through the $80/barrel barrier. A lot of this momentum comes from positive economic data in the US, where the economy grew faster than expected in Q4. Not just that, but January’s PMIs also exceeded expectations, adding more fuel to the fire. | Brent Crude: Trading around $81. WTI: Not far behind, trading at about $76.50. Natural Gas in Europe: Interestingly, it’s on a downward trend, with the Dutch benchmark at 27 EUR/MWh.
| And here’s a kicker: US weekly inventories took a nosedive, dropping by 9.2 million compared to the expected 1.2 million. This dramatic fall has definitely played a part in pushing oil prices up. | Gold & Metals | | After a long slump, industrial metals are making a comeback. And guess who might be behind this? China is likely gearing up to roll out more economic support measures. But there’s another twist – Europe is getting tough on Russia, potentially ramping up sanctions targeting Russian aluminum. | Copper: Climbed to $8,500/tonne in London. Aluminum: Also on the rise, crossing the $2,200 mark.
| As for precious metals, gold is, well, kind of stuck in the mud, flat at $2020. It seems like financial uncertainties, especially regarding the Fed’s rate cut timing, are causing this lethargy. | Are you looking interested in gold? Click here to sign up for the Free Gold Playbook Newsletter. | Crypto | | Cryptocurrencies have had a bit of a rough week, haven’t they? Bitcoin, for instance, is down more than 1% since Monday, approaching the $41,000 mark. But Ethereum (ether) is having a tougher time, plunging over 8% and now hovering around $2,250. | Bitcoin: Down to around $41,000. Ethereum: Suffering more, falling to about $2,250.
| The drop in Ethereum’s value is partly due to the SEC delaying its decision on Grayscale and BlackRock’s Ethereum Spot ETFs. And Bitcoin? Well, the approval of eleven Bitcoin Spot ETFs since January 11 has ironically led to a 15% fall in its value. The crypto market as a whole has lost almost $200 billion in valuation since then. Talk about unexpected consequences! | | This week is shaping up to be a blockbuster in the financial world, with a packed schedule of earnings reports from tech titans and a keenly anticipated Federal Reserve meeting. | Wednesday, January 31: Fed Interest Rate Decision Friday, February 1: Unemployment Rate (January)
| Tech Heavyweights On The Earnings Stage | The tech sector is set to dominate headlines with its earnings reports. We’re talking about the big guns here: | Monday, January 29: Whirlpool (WHR) and Nucor (NUE) kick things off. Tuesday, January 30: A busy day with General Motors (NYSE:GM), UPS (UPS), Sysco (SYY), Pfizer (PFE), Alphabet (GOOG), Microsoft (MSFT), Starbucks (SBUX), Mondelez (MDLZ), and AMD (AMD) stepping into the spotlight. Wednesday, January 31: Phillips 66 (PSX), Boeing (BA), Mastercard (MA), MetLife (MET), Qualcomm (QCOM), and a second appearance from Boeing. Thursday, February 1: Merck (MRK), Honeywell (HON), Altria (MO), Amazon (AMZN), Apple (AAPL), Meta Platforms (META), Royal Caribbean (RCL), and Post Holdings (POST) take the stage. Friday, February 2: The week wraps up with Exxon Mobil (XOM), Chevron (CVX), AbbVie (ABBV), and Charter Communications (CHTR).
| Eyes will particularly be on Apple (AAPL), Amazon (AMZN), Microsoft (MSFT), Alphabet (GOOG), and AMD (AMD). These reports could set the tone for the tech sector and influence market sentiment broadly. | The Federal Reserve’s Balancing Act | Amidst the earnings frenzy, the Federal Reserve meeting on January 30-31 will likely be a market mover. While interest rates are expected to hold steady, it’s the subtleties in the policy statement and Jerome Powell’s presser that will be dissected for any hawkish or dovish leanings. Analysts, like Seeking Alpha’s Chris Lau, anticipate a deep dive into the trade-offs between cutting rates and the risk of future inflation, which stubbornly remains above the 2.0% target. | | | | Jobs Report And Tesla’s Ongoing Saga | As the week draws to a close, the U.S. jobs report will come into focus, providing crucial insights into the labor market’s health. Amidst these major events, Tesla (TSLA) is expected to continue making waves. Investors and analysts are grappling with the company’s premium valuation in light of lowered unit volume expectations, adding another layer of drama to an already eventful week. | Dividends In The Spotlight | In the realm of dividends, several companies are anticipated to announce increases in their quarterly payouts: | General Motors (GM) is expected to raise its dividend to $0.12 from $0.09. Old Dominion Freight Line (ODFL) might bump theirs to $0.50 from $0.40. Moody’s (MCO) could increase to $0.85 from $0.77. Oshkosh (OSK) is forecasted to go up to $0.45 from $0.41. Piper Sandler (PIPR) might hike to $0.65 from $0.60.
| These potential increases are good news for dividend investors and signal corporate confidence in sustained earnings growth. | |
|
