Broker Check


THIS WEEK'S UPDATE

| February 12, 2024

The Week On Wall Street
The stock market experienced solid gains last week, concluding the trading week on a positive note, thanks to robust corporate reports and favorable inflation news; this propelled the S&P 500 Index to achieve a new record high at the end of the week.
 
At the start of last week's trading, stocks faced downward pressure due to comments by Fed Chair Powell over the weekend, signaling that the Federal Reserve had no immediate plans to initiate interest rate cuts. Consequently, the yield on the two-year U.S. Treasury note, highly influenced by monetary policy, increased to its highest level in two months. By the end of trading on Monday, stocks had regained a significant portion of their previous losses. Influencing this market rally were positive corporate earnings reports. This trend continued throughout the week, contributing to the overall market momentum. By Friday, 67% of the companies listed in the S&P 500 had released their Q4 results, and an impressive 77% of those companies exceeded earnings expectations. 
 
Investors expressed enthusiasm on Friday after a report indicating that December's inflation was lower than initially anticipated. This positive news revitalized buying activity, resulting in the S&P 500 surpassing 5,000 for the first time.
 
Economic Strength
The strength of the U.S. economy has come into the spotlight. An analysis conducted by The Wall Street Journal recently proposed that the economy's resilience could be attributed, at least in part, to the productivity driven by the technology sector. What might rein in that productivity? One possible influence could be the increase in oil prices witnessed last week. Additionally, shipping companies have been imposing surcharges for several months to mitigate recent conflict, and these charges may contribute to global inflation this year, potentially dampening investor enthusiasm.
 
This Week: Key Economic Data
Tuesday: Consumer Price Index (CPI).
Wednesday: EIA Petroleum Report.
Thursday: Industrial Production. Retail Sales. Jobless Claims. 
Friday: Housing Starts. Producer Price Index (PPI). Consumer Sentiment. 
 
This Week: Notable Companies Reporting Earnings
Monday: Arista Networks, Inc. (ANET), Waste Management, Inc. (WM)
Tuesday: The CocaCola Company (KO), Shopify Inc. (SHOP), AirBnB, Inc. (ABNB), Moody’s Corporation (MCO)
Wednesday: Cisco Systems, Inc. (CSCO), Sony Corporation (SONY), Kraft Heinz Company (KHC)
Thursday: Applied Materials, Inc. (AMAT), Deere & Company (DE)
 
Final Thoughts
As far as the market hitting all-time highs goes, I submit a quote from Laszlo Birinyi:

"Historically somebody would have said days like this and numbers like this are like crossing state lines with kids. They get so excited for five minutes and then they ask, where is the next McDonald's? I would not consider it an indicator of any real substance or significance."
 
We may get some more follow on to the fantastic rally we’ve seen, but in the near term the market is overbought.  Don’t be surprised to see some kind of short-term pullback before too long.  
 
Meanwhile, tomorrow’s CPI number will likely be the main catalyst of the week for stocks.
 
Stay tuned…