Week in Review: February 9, 2024
February 12, 2024
Recap & Commentary
Markets ended the week higher, with the S&P 500 setting another record high as it closed above 5,000 for the first time ever. While there is nothing fundamentally significant about that level, it represents a psychological hurdle if nothing else. By way of comparison, during the depths of the Covid sell off in March 2020, the S&P closed at a low of 2,237 on March 23.
For most of the week, markets drifted higher seemingly taking the path of least resistance. Economic data was relatively light, but a rebound in US services sector activity in January reinforced the economy’s resilience. Several Fed officials offered their views on the economy and monetary policy, essentially reinforcing Fed Chair Jay Powell’s recent comments that inflation appears to be headed in the right direction, but that the Fed is unlikely to cut rates at its next meeting in March.
Cleveland Fed President Loretta Mester said the Fed could lower rates later this year but that it would be a “mistake” to cut prematurely. Richmond Fed President Tom Barkin shared similar views, noting that he does not want a repeat situation of the 1980’s when the Fed, under former Chair Paul Volker, cut rates after inflation appeared to receded, only to be forced to raise them again a year later when inflation reaccelerated. Thus, Barkin wants to see the Fed takes its time to build greater confidence that inflation is moving sustainably lower before committing to rate cuts.
Through Friday, 67% of S&P 500 companies had reported 4Q23 earnings. Thus far, 75% of companies have exceeded analyst forecasts. According to industry group FactSet, consolidated earnings growth for 4Q23 is expected to be 2.9%.
Economic Commentary
US service sector activity continued expanding in January, as measured by the ISM Services index, which rose from 50.5 in December to 53.4. The reading was well ahead of the consensus forecast of 52. The new orders index increased to 55 from 52.8 in December, while the business activity index was unchanged at 55.8. The largest increase came from the prices index, which rose by 7 points to 64, the highest level since February 2022.
US consumer credit rose $1.5B in December, a steep decline from the $23.4B increase the prior month. Economists had forecast a $15B increase in December. Total outstanding credit card balances stood at $1.13T at the end of last year. During 4Q23 balances that were 90 days past due on payment rose to an annualized rate of 6.3%, the highest level since the 2nd quarter of 2011.
The U.S. trade deficit widened to $62.2B in December, larger than the forecast of $62B. Exports rose by $3.9B, while imports rose by $4.2B. However, in 2023 the trade deficit contracted by the most in 14 years as imports declined 0.4% and exports increased 3.2% to a record high. Petroleum exports surged 16% to an all-time high in December, continuing a trend of less U.S. reliance on foreign oil in recent years. The composition of U.S. trade partners also changed drastically in 2023. Imports from China fell 20% vs. 2022, and Mexico became the US’s top trade partner.
Of Note
Microsoft ended the week with a market cap of $3.125T, surpassing the all-time high market cap for a US company of $3.09T, previously set by Apple.
Market Indices (As of 02/09/2024)
- Consumer Inflation (CPI)
- Producer Inflation (PPI)
- Retail Sales
- Housing Starts
- Consumer Sentiment
- Industrial Production
- Weekly Jobless Claims
