EZBites~week ending January 5, 2024
LAST WEEK:
DOW:-0.6% (YTD:-0.6%)
NASDAQ:-3.2% (YTD:-3.2%)
S&P:-1.5% (YTD:-1.5%)
The U.S. stock market registered losses during the first week of 2024 following a strong close out to 2023. ?Profit-taking activity in mega-caps and other names that outperformed last year contributed to the downbeat price action.
The Vanguard Mega-Cap Growth ETF fell 3.0% vs a 1.5% decline in the overall market. Apple ?was a standout loser, dropping nearly 6.0%, after two analyst downgrades and news that the DOJ is getting close to filing an antitrust case against Apple.
In addition to profit-taking activity, rising market rates also contributed to this week’s negative bias after the 10-yr yield climbed 16 basis points to 4.04% and the 2-yr note yield rose 14 basis points to 4.39%. The price action in Treasuries was partially due to a recalibration of rate-cut expectations after the Minutes from the December 12-13 FOMC meeting were less dovish than hoped, implying that the Fed isn't divorcing itself entirely from the idea that it might still have to raise rates again.
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Notably, areas of the market that held up better this week were those that were left out of last year's gains: The only three S&P 500 sectors to register a decline in 2023 saw some of the largest gains this week such as Utilities, which fell 10.2% last year and logged a 1.8% gain this week, Energy, which declined 4.8% in 2023, climbed 1.1% this week, and Consumer Staples which fell 2.2% last year, closed with a 0.03% gain this week. Additionally, Healthcare was another top performer this week, registering a 2.1% gain but was only near break-even for 2023. Meanwhile, the ?Information Technology (-4.1%) and Consumer Discretionary (-3.5%) sectors saw the largest declines after outperforming last year.
The December Employment Situation Report showed solid employment numbers which may keep the Fed from cutting rates as much as the market had expected, whereas a soft reading for business activity in the nation's largest sector would perhaps keep the Fed aligned with the market's rate-cut expectations.
The probability of a 25 basis points rate cut to 5.00-5.25% at the March FOMC meeting is 68.3% versus 88.5% last week.
Our February EZTracker Newsletters come out Sunday, January 28, 2024