Stocks Set Another Record as Rates Fall and Earnings Begin

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Stocks are nearing record highs as earning season begins.

The S&P 500 rose 1.8 percent between Friday, January 5, and Friday, January 12. The index managed to hold a support level from mid-December and had its highest weekly close ever. The Dow Jones Industrial Average and Nasdaq-100 also climbed.

Data on consumer prices and producer prices mostly confirmed slower inflation. That helped lower interest rates and bolster hopes of the Federal Reserve cutting interest rates in March. Public comments by Michelle Bowman and Raphael Bostic (both voting policymakers) seemed to confirm the trend. Oil fell on higher inventories and Saudi Arabia cut prices in response to weak demand. A New York Fed survey also showed inflation expectations hitting a three-year low.

Biggest Gainers in the S&P 500 Last Week
Juniper Networks (JNPR)+25%
Palo Alto Networks (PANW)+15%
Intuitive Surgical (ISRG)+13%
Nvidia (NVDA)+11%
Fair Isaac (FICO)+10%
Source: TradeStation Data

Meanwhile, fewer jobless claims suggested the labor market is still strong. Fannie Mae separately reported that more Americans expect mortgage rates to fall than to rise — something that had never occurred since its poll began in 2010.

The combination of easing inflation, falling rates, steady growth and improving housing sentiment may bolster perceptions of a economic “soft landing.” That could support sentiment as 2024 progresses and companies report quarterly results.

Microsoft Passes Apple

Certain large-cap growth stocks made new highs last week, while other prominent names struggled.

Microsoft (MSFT) and Nvidia (NVDA) jumped from tight consolidation patterns as investors continue to focus on their AI growth stories. MSFT also surpassed Apple (AAPL) as the most valuable company in the world. AAPL has recently struggled with downgrades, a lack of AI products and worries about iPhone demand.

Netflix (NFLX) also rallied after Oppenheimer raised its price target from $475 to $600. The analyst cited growth in ad-based subscriptions. Palo Alto Networks (PANW) climbed to new record levels after Morgan Stanley noted ongoing demand for cybersecurity.

Those moves made technology and communications the best-performing sectors last week. Energy had the biggest decline overall, according to TradeStation data.

Tesla (TLSA) slid the most since mid-October after Hertz Global (HTZ) announced plans to reduce its electric-vehicle fleet. It revised downward the driving ranges of its vehicles, raised worker pay but failed to hike prices for upgraded versions of its Model 3.

Boeing (BA) was the worst performer in the S&P 500 after being forced to ground its 737 Max 9 planes.

S&P 500, daily chart, showing select levels and patterns.

Intuitive Surgical (ISRG) gained after preannouncing strong quarterly results. Uranium producer Cameco (CCJ) jumped to new highs on signs that nuclear fuel could be in short supply.

Last week was also notable because the U.S. Securities and Exchange Commission approved exchange-traded funds (ETFs) tracking the spot price of Bitcoin.

Charting the Market

Some patterns may reflect an upward bias in the stock market.

First, the S&P 500 held its mid-December low around 4695 after the Fed signaled more rate cuts. That kind of shallow pullback — not even testing the summer highs — may suggest buyers outnumber sellers.

Second, Friday’s last price of 4784 was the highest weekly closing price ever. Traders may next watch levels from January 2022 like 4797 (record daily closing price) or 4818 (intraday all-time high).

Third, intermarket analysis of other charts may give few warning signs. Two-year Treasury yields, for example, hit their lowest level in almost eight months as investors looked for the Fed to cut interest rates. Crude-oil and Cboe’s volatility index (VIX), which often rise at times of fear, have also trended lower.

The Week Ahead

Biggest Decliners in the S&P 500 Last Week
Boeing (BA)-13%
Paramount Global (PARA)-9%
Eversource Energy (ES)-8.4%
Tesla (TSLA)-7.8%
Mosaic (MOS)-7.7%
Source: TradeStation Data

This week features some mid-level economic data and more earnings.

Goldman Sachs (GS) and Morgan Stanley (MS) are the two big companies issuing results today.

Retail sales are due Wednesday morning. Charles Schwab (SCHW) and U.S. Bancorp (USB) report earnings.

Housing starts, building permits, initial jobless claims and crude-oil inventories are on Thursday. Taiwan Semiconductor (TSM) and Key Corp (KEY) announce results.

Friday brings existing home sales, consumer sentiment and earnings from Schlumberger (SLB).

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