Stocks rose for a third straight month in January, but some investors may worry most of the good news is priced in for now.
The S&P 500 advanced 1.6 percent between December 29 and January 31. At one point it was up as much as 3.4 percent, but fell sharply to end the month. The Nasdaq-100 and Dow Jones Industrial Average also climbed similar amounts. All three benchmarks also established new highs.
Investors entered the year riding a wave of optimism after inflation eased in late 2023. Major technology stocks like Microsoft (MSFT) and Nvidia (NVDA) surged to new records on optimism about Artificial Intelligence. However investors took profits and “sold the news” once earnings came out, dragging prices lower.
Most economic news was stronger than expected, including job growth, gross domestic product (GDP) and retail sales. While that’s positive for sentiment in the longer run, it gives the Federal Reserve less reason to cut interest rates. That contributed to the late-January pullback.
There was also some noteworthy news for big large growth stocks. MSFT edged ahead of Apple (AAPL) as the world’s most valuable company. Interesting, MSFT has broken out above its 2023 highs while AAPL is still below its old peaks. That may suggest longer-term momentum favors the software giant.
Tesla (TSLA) also had its biggest monthly drop since December 2022 after missing estimates and warning of lower growth. Other companies associated with green energy, like Enphase Energy (ENPH) and Albemarle (ALB), were among big decliners last month.
Big Movers in January
| Top Gainers in the S&P 500 Last Month | ||
| Juniper Networks (JNPR) | +26% | Hewlett Packard Enterprise (HPE) agreed to buy the networking company for $14 billion in cash. |
| Nvidia (NVDA) | +24% | The semiconductor giant broke out to new highs on demand for AI chips, including specialized products for China. |
| Netflix (NFLX) | +16% | The streaming-video giant added more subscribers than expected as its new ad-based service gains traction. |
| WR Berkley (WRB) | +16% | The insurance stock broke out to record highs after earnings and revenue beat estimates. |
| Catalent (CTLT) | +15% | The drug manufacturer continued to rebound from accounting and manufacturing problems in 2023. |
| Top Decliners in the S&P 500 Last Month | ||
| Tesla (TSLA) | -25% | The EV maker missed estimates and projected “notably lower” growth amid weaker pricing and increased competition. |
| Archer Daniels Midland (ADM) | -23% | The food processor placed its CFO on administrative leave and delayed announcing results as it reviews accounting practices. |
| MarketAxess (MKTX) | -23% | The bond-trading firm fell despite reporting better-than-expected earnings and revenue. |
| Enphase Energy (ENPH) | -21% | The solar-energy stock resumed its longer-term downtrend after rebounding from three-year lows in late 2023. |
| Albemarle (ALB) | -21% | Sellers returned to the lithium producer after it bounced in December. |
Sector Watch
| Communications | +4.6% |
| Financials | +3.2% |
| Health Care | +3.1% |
| Technology | +2.9% |
| S&P 500 | +1.7% |
| Consumer Staples | +1.3% |
| Energy | -0.4% |
| Industrials | -0.8% |
| Utilities | -2.9% |
| Materials | -3.8% |
| Consumer Discretionary | -4.3% |
| Real Estate | -4.6% |
Key Economic Events in January
Below are some key economic events from last month.
- Job growth, unemployment beat estimates: The U.S. added 216,000 jobs in December, beating the 170,000 forecast. Unemployment was also lower than expected. (1/5)
- Retail sales beat again: Retail sales increased by 0.6 percent overall in December and 0.4 percent excluding automobiles. Both readings were double consensus. It was the sixth straight month that retail sales beat estimates. (1/7)
- Historic rebound in consumer sentiment: Consumer sentiment rose more than expected to its highest level since July 2021. The index has had its biggest two-month increase since 1991 as inflation worries ease. (1/19)
- Economic growth beats estimates by a wide margin: Gross domestic product expanded 3.3 percent in the third quarter, well ahead of the 2 percent forecast. Consumer and government spending helped drive the increase. (1/25)
What Experts Are Saying
Below are some noteworthy commentaries.
- Market strategists raised their targets for the S&P 500, expecting that lower inflation will reduce interest rates. Wells Fargo hiked its estimate from 4,800 to 5,000 (1/10). UBS is looking for a move to 5,150 versus its earlier projection of 4,850 (1/16).
- Inflation might get stuck at 3 percent, according to Mohamed El-Erian of Allianz. He cited higher shipping costs because of Red Sea disruptions, a tight labor market and less chance of goods prices falling. El-Erian thinks the Federal Reserve will wait until the summer before lowering interest rates. (1/12)
- Inflationary trends are slowing as rental costs subside, Morgan Stanley said. The investment bank lowered its 2024 estimate for the core personal consumption expenditures (PCE) index from 2.3 percent to 2.2 percent. It sees quicker rent drops starting in July. (1/24)
- Auto-lending data suggests older buyers are losing interest in electric vehicles, according to Bank of America. Hybrid vehicles were expected to benefit from the trend, which is associated with costs and limited EV range. Bank of America now sees lower uptake of EVs and market share through the end of the decade. (1/25)
- Payroll growth could slow to under 50,000 jobs per month by mid-2024, JPMorgan economist Michael Feroli forecast. That would lift the unemployment rate above 4 percent and let the Fed cut interest rates in June. He said strong inventory growth in the fourth quarter will reduce demand in the current quarter. (1/25)
Popular Futures Contracts in January
| Product | Current Month | Expiration | Next Month | 1-Mon% |
| S&P 500 E-Mini (@ES) | ESH24 (Mar) | 3/15/24 | ESM24 | +1.1% |
| Nasdaq-100 E-Mini (@NQ) | NQH24 (Mar) | 3/15/24 | NQM24 | +1.3% |
| Dow Jones E-Mini (@YM) | YMH24 (Mar) | 3/15/24 | YMM24 | +0.7% |
| Russell 2000 E-Mini (@RTY) | RTYH24 (Mar) | 3/15/24 | RTYM24 | -4.5% |
Newsworthy Events This Month
| Date | Event | What to Watch For |
| Fri 2/2 | Employment report | Job-market conditions: unemployment, wages, hours worked. |
| Tue 2/13 | Consumer price index (CPI) | Inflation trends |
| Thu 2/15 | Retail sales | Will sales beat estimates for a seventh straight month? |
| Fri 2/16 | Housing starts, building permits | Housing-market activity |
| Wed 2/21 | Fed minutes | Guidance on balance-sheet reduction, next meeting on March 31 |
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