Market Insights: Tech Stocks Soar and Eyes Turn to Central Bank Meetings and Q4 Earnings ???????

January 22, 2024

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Read on for this week's market recap and find out what the week ahead may bring.

?? Tech stocks lead the rally?????

At the end of last week, it was clear that once again it was the US tech giants who were at the forefront of the current rally in equities.?The NASDAQ 100, or US Tech 100 as we call it, traded at a fresh record high.?At the vanguard of the move were tech giants such as Nvidia, who are already up 17% so far this year.??

Bear in mind that the maker of chips used in generative AI rose 239% in 2023, making it the best performing stock in both the NASDAQ 100 and the S&P 500.??

?? Meta Platforms, formerly Facebook, is up 7%.??

?? Microsoft, which reports earnings on Thursday, is up 6%.??

?? Alphabet, parent to Google and YouTube amongst others, has risen just under 4%, while Amazon has tacked on around 2%.??

?? Apple had a disastrous start to the New Year, falling 10% in the three weeks from mid-December.?It is now effectively unchanged, having rallied sharply last week on an upgrade from Bank of America.??

?? From the last trading day of December to Friday’s morning low, Elon Musk’s Tesla is down over 22%, at close to $200 per share- compare this to its all-time high just under $415 in November 2021.??

Check out the US Tech 100.

?? Crude oil – rangebound?????

Oil prices continue to trade sideways with a lack of overall direction, having sold off steadily for the first half of last week, prices rebounded on Wednesday afternoon.??

This followed the release of an OPEC report forecasting a significant increase in global demand: the report predicted oil demand growth of 2.25 million barrels per day this year, and 1.8 million barrels per day in 2025.??

On Thursday, after a listless morning session, crude suddenly rallied again after a report from the International Energy Agency (IEA) said it also expects robust growth in global oil demand.??

Last week Iran and Pakistan traded missiles, and the Yemeni Houthis have vowed to keep on attacking vessels in the Red Sea, despite the response from US and UK warships.?Many shippers are avoiding the Red Sea and Suez Canal by taking longer and more costly routes around southern Africa instead.?The geopolitical uncertainty across the region is keeping a floor under prices.??

However, crude oil is also capped by the prevailing view that supply is plentiful, and even an uptick in global demand should be met easily.?It’s worth noting that oil prices are currently rangebound.??

Since mid-December, front month WTI has failed to break out significantly from a price band of $70 and $75.??

Check out crude oil.

Looking ahead ??

?? Fourth quarter earnings????

Netflix reports on Tuesday, Tesla on Wednesday and Microsoft on Thursday.??

It’s fair to say that while the season is just getting underway, results so far have done little to influence market behaviour. All the big banks have now reported to little fanfare as the results were mixed.?On top of this, geopolitical concerns, inflation updates and speculation over the timing and degree of rate cuts have dominated discussions about market direction.?It is now quite likely that the fourth quarter earnings season will regain its importance, notwithstanding upcoming central bank meetings.??

Will they help to push US stock indices to fresh record highs, or act as a catalyst for a round of profit-taking??

Check out the US 500.

?? Central bank meetings?????

This week sees the first central bank meetings of 2024.?This is a major focus for investors as there’s a high probability that we will get rate cuts for the first time in many years.?However, that won’t be the case for the Bank of Japan, who will make their announcement on Tuesday morning, with their policy rate currently negative at -0.10%.??

There has been much speculation concerning when the BOJ may raise rates, thereby taking them out of negative territory for the first time since 2006. Analysts insist it won’t be at this meeting, as the move will require a great deal of forward notice to prepare the markets.??

However, there is speculation that BOJ governor Kazuo Ueda may start to prepare the ground as early as this week.?After a strong rally since last November on rate hike speculation, the Japanese yen has fallen sharply so far this year.?This has helped to lift the Nikkei 225 to its highest levels in over thirty years.?The USDJPY is once again approaching 150.00 and last week Japanese inflation fell more than expected.?

The European Central Bank (ECB) also meets this week, with the rate announcement expected on Thursday.?Like both the US Federal Reserve and the Bank of England, the ECB is expected to start cutting rates this year.?This comes as inflation in all three regions has declined steadily over the past eighteen months or so.?However, it remains above the respective targets for all three central banks.??

The ECB isn’t expected to cut its key Main Refinancing Rate at this meeting, yet at the beginning of the year the market was pricing in 200 basis points of rate reductions for the ECB with the first cut coming in March. ECB officials, including its President Christine Lagarde, along with senior members Joachim Nagel and Robert Holzmann, have all warned against expecting early cuts.?In fact, Mr Holzmann said last week that he doesn’t expect any cuts in 2024.??

?? The economic calendar????

?? On Monday sees a decision on 1-year and 5-year Loan Rates from the People’s Bank of China.

?? Tuesday sees a monetary policy meeting for the Bank of Japan with an accompanying statement and press conference, and the US Richmond Manufacturing Index.

?? On Wednesday we have the Flash Manufacturing and Services PMIs from France, Germany, the Eurozone, UK and US. There’s also a rate decision from the Bank of Canada.

?? On Thursday, the European Central Bank (ECB) will announce its latest decision on monetary policy, after which ECB President Christine Lagarde will hold a press conference. From the US we have Advance GDP, weekly Unemployment Claims and Durable Goods.

?? On Friday we finish with an update on the Fed’s preferred inflation measure, Core PCE, and Pending Home Sales.??

?? This week’s key Q4 earnings???

?? Monday:??

Brown & Brown, United Airlines, AGNC, Zions Bancorp.?

?? Tuesday:?

Johnson & Johnson, Procter & Gamble, Netflix, Verizon, Texas Instruments, General Electric, DR Horton, Baker Hughes, Halliburton.??

?? Wednesday:?

Tesla, Abbott Labs, SAP, IBM, AT&T, Lockheed Martin, CSX.?

?? Thursday:?

Microsoft, Visa, Intel, T-Mobile, Comcast, Union Pacific, NextEra Energy, Northrop Grumman, Valero Energy, Southwest Airlines, American Airlines.??

?? Friday:?

Caterpillar, American Express, Mondelez, Altria, Colgate-Palmolive, Las Vegas Sands, Xerox.?

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