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WEEKLY SUMMARY: Stocks resume advance as earnings season kicks off
Stocks moved higher over the week. The Nasdaq Composite index surged over 3% on the week (best one since early Nov '23) while The Dow and Small Caps were unchanged (S&P closed up almost 2% on the week). Several tech giants recorded solid gains, including Facebook / Meta Platforms and chipmaker NVIDIA. Energy stocks underperformed as oil prices pulled back early in the week. US our largest banks—JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo—reported fourth-quarter results on Friday. Data releases on the week’s light economic calendar came in roughly in line with expectations. US Headline core CPI rose 0.3% in December, a tick more than expected, but core CPI also rose 0.3%, in line with consensus. Producer price data, released Friday morning, was somewhat more encouraging. Fixed income investors appeared unshaken by the modest upside surprises in the consumer inflation data, with the yield on the benchmark 10-year U.S. Treasury note falling back below 4% over the week. The pan-European STOXX Europe 600 Index ended the week little changed while ECB’s Lagarde says the worst of the inflation fight is likely over. Japan’s Nikkei 225 Index rose 6.6%, the highest level in almost 34 years. Chinese equities retreated as data showed that China’s deflationary cycle persisted into December, raising expectations of increased government support in 2024. Bitcoin ended the week marginally lower (after early week gains evaporated on 'sell-the-news' flow). Oil and Gold rose.
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Most of US equities indices rose to record highs, as investors wagered that a “red sweep” (Republicans winning Presidency, Senate and Congress) would result in faster earnings growth, looser regulations, and lower corporate taxes. The small-cap Russell 2000 Index surged 8.57% for the week but was the sole benchmark to remain out of record territory. Meanwhile, the Dow Jones hit 44.000 for the first time while the S&P 500 closed just shy of 6,000, up 4.7% for the week, its best weekly gain in almost a year. On Thursday, the Fed announced a 25bps rate cut, its first easing move since cutting rates by 50 basis points in mid-September. In terms of economic data, the October ISM services sector activity came in at 56.0, well above expectations and the best reading since August 2022. U.S. Treasuries generated positive returns heading into Friday, as yields largely ended lower than where they ended the previous week.