WEEKLY SUMMARY: Equities end with narrow advance; bonds fell
US stocks ended mostly higher but the advance was narrow with technology stocks outperforming, helped by a rally in semiconductor shares. AI chip giant NVIDIA was particularly strong, as was rival AMD. On Tuesday, shares of Boeing fell sharply after the company reported earnings following an analyst downgrade. The week’s data offered some starkly different pictures of the economy’s health. On Tuesday, the New York Manufacturing index reached its lowest level since early in the pandemic. Conversely, Wednesday’s December retail sales numbers easily exceeded expectations, up 0.6% in October, with online sales growing 1.5% and hitting a new record high. On Friday, the University of Michigan preliminary report of consumer sentiment jumped in January to its highest level in nearly three years and by the most since 2005, providing evidence that consumers finally believed that “inflation has truly turned the corner.” Expectations for Fed rate cuts in 2024 fell sharply over the week, with futures markets pricing only a 13% chance of 7+ rate cuts in 2024 versus 61% the week before. Chances of a rate cut in March fell from 81% to 47%. The yield on the 10-year U.S. Treasury note rose sharply higher for the week and to its highest intraday level since December 12. In the rest of the world, the STOXX Europe 600 Index ended the week 1.58% lower. The Nikkei 225 Index gained 1.1% to reach a 34-year high. The Shanghai Composite Index fell 1.72%, its 8th weekly drop in the past 9.
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Most US equities indexes ended the week lower, although the tech-heavy Nasdaq Composite advanced modestly and cleared the 20,000 mark for the first time. The Russell 2000 Index recorded a second consecutive week of underperformance against the S&P 500 Index. Growth stocks posted a third consecutive week of outperformance versus value, thanks in part to gains in shares of Tesla (12%) and Alphabet (8.4%). On the macro-economic side, stagflation fears started to rise once again. Indeed, YoY CPI and PPI both accelerated. Meanwhile overall macro surprises disappointed for the fourth week in a row: on Thursday, the Labor Department reported a surprise jump in weekly initial jobless claims to a two-month high of 242,000.