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THIS WEEK'S UPDATE

| January 22, 2024

Stocks finished higher last week, with big tech again leading amid lingering uncertainty over how continued economic strength would influence the Fed’s rate decision.
 
Stocks Dip, Then Rally 
Stock prices dropped early in the week before rising to new highs as the week ended. The four-day trading week began with more Q4 bank earnings, which disappointed. The news pushed the financial sector and the broader S&P 500 Index lower on Tuesday. The yield on the 10-year Treasury climbed after a Fed Governor said the central bank may not adjust rates as much as markets expect. That and a stronger-than-expected holiday retail sales report put pressure on stock prices. Tech stocks drove the Thursday rally, with the S&P and Nasdaq recouping their 2024 losses. Stocks continued their tech-led climb on Friday, with the S&P 500 rising to an all-time high—its first record close in over two years. The Nasdaq gained 1.70% on Friday, capping a solid week for the tech-heavy index.
 
Navigating the Middle
Sentiment see-sawed last week as investors tried to anticipate the Fed’s next move. The week was full of economic news that suggested continued resilience in the economy, which may add complexity to the Fed’s next decision. December retail sales came in strong, +0.6% for the month, besting economists' expectations of +0.4%. November and December combined to depict a robust holiday shopping season. Unemployment dipped unexpectedly for the second week of January–a sign of a resilient U.S. labor market. That labor news and hotter-than-expected housing starts pushed the yield on the 10-year Treasury to 4.14%, its highest level in more than a month.
 
This Week: Key Economic Data
Tuesday: US Two-Year Note Auction.
Wednesday: PMI Composite. Petroleum Status Report. 
Thursday: Gross Domestic Product, Advance estimate of Q4 and Year 2023. Durable Goods Orders. Jobless Claims. Housing Starts. 
Friday: Personal Income and Outlays.
 
This Week: Notable Companies Reporting Earnings
Monday: United Airlines Holdings Inc. (UAL)
Tuesday: Microsoft Corporation (MSFT), Johnson & Johnson (JNJ), The Procter & Gamble Company (PG), Netflix, Inc. (NFLX), Verizon Communications Inc. (VZ)
Wednesday: Tesla, Inc. (TSLA), Abbott Laboratories (ABT), International Business Machines Corporation (IBM), AT&T Inc. (T)
Thursday: Visa Inc. (V), Intel Corporation (INTC), T-Mobile US, Inc. (TMUS), Marsh & McLennan Companies, Inc. (MMC), Northrop Grumman Corporation (NOC)
Friday: American Express Company (AXP), Colgate-Palmolive Company (CL)
 
Final Thoughts
The markets are pushing back to highs just as we ramp up election season.  What does that mean?  Well, not a lot I suppose, but usually election years are somewhat volatile going into the elections.  I’m not sure there is anything different this year.  The economy is doing okay and doesn’t seem like it will come off the rails.  The market may have gotten a little overzealous in how fast the Fed may cut rates though.  Housing inflation seems to be the domino they are waiting to fall.  If they cut rates very much, housing is likely to ramp back up even more which could make inflation worse.  So, my guess is we get some kind of token cut in the March or May meeting.   We’ll know more as we get closer.
 
So, it looks like the Presidential race is down to three horses.  Add in whatever adjective you feel is fitting after horses. 🤣  Two Republicans and the incumbent Democrat.  This is assuming President Biden is running as it is reported he is.  We aren’t too political here, it doesn’t help much since all we get to do is hold our nose and vote.  Yours might cancel mine out, or not, but at the end of the day we all have to make the most of the cards we are dealt.  So, if you’re a praying person you pray for them to not make too much of a mess until they pass the baton to the next one.  After all, the American people make America what it is, not a handful of folks bargaining with each other and jockeying for power.  But, I digress.
 
Seasonally, we are in a good period for the markets, but election years tend to get a bit wonky.  I do think we end the year positive, it just won’t be the escalator ride we would like.
 
Stay tuned…