What happened in the markets: 1 Jan - 5 Jan 2024
The Fed's future policy outlook and the latest labor market update were the focal points of the week. While neither brought about major surprises, they did confirm the trajectory for the economy and the potential for Fed interest-rate adjustments, which are reasonably positive but not definite.
Last week, stocks experienced a decline and interest rates rose (10-year Treasury note yield (TNX) was up about 6 basis points at 4.051%), putting an end to the S&P 500's nine-week winning streak. Given the significant upward movement in equities over recent months, it's not unexpected to witness a pause in the markets.
It's probable that the beginning of 2024 will bring about more volatility than the end of 2023, but analysts maintain a positive outlook for stocks and bonds this year. Analysts see intermittent pullbacks as an opportunity to enhance diversification and rebalance portfolios following the significant movements in stocks and rates in recent months.
Last week at a glance
Strong Start For Crypto Related Stocks
Bitcoin has started the week by reaching new heights, surpassing $45,000 for the first time since April 2022. This surge comes amid growing expectations that the SEC could soon approve a spot bitcoin ETF. The imminent approval has caused bitcoin to more than double in value over the past year, outperforming gold and global equities. Although it is still below its 2021 peak of $69,000, the upbeat sentiment has lifted crypto-related stocks, including Coinbase (COIN), Riot Platforms (RIOT), and Marathon Digital (MARA). "I suspect approval makes a nice narrative for bitcoin going higher, but the chart shows us this as the more likely outcome without needing to predict the SEC’s actions," noted SA Investing Group Leader Jason Appel.
Rate Cuts Might Not Come So Soon - Depends On Incoming Economic Data
The latest FOMC minutes did not provide much insight on the timing of potential rate cuts. Fed officials acknowledge "an unusually elevated degree of uncertainty" about the economic outlook. "The minutes confirm whatever you wanted to think about the direction of U.S. interest rates before the release," UBS' Paul Donovan said. "I would suggest they are consistent with three rate cuts, starting later than March - but that was my bias before the minutes." Some Fed members also noted that keeping the benchmark rate at an elevated level might be necessary should inflation stay above target, that would mean that the central bank will continue to base its policy decisions on incoming economic data.
Apple VS Microsoft - Most Valuable Company In The World
The title of the world's most valuable company may soon shift from Apple (NASDAQ: AAPL) to Microsoft (NASDAQ: MSFT). Microsoft closed out the session on Thursday with a market cap of $2.73 trillion, compared to its tech rival's $2.83 trillion, which has been declining in every session of the new year. Apple, which has held the crown since November 21, recently faced downgrades from Barclays and Piper Sandler over concerns about iPhone sales, hardware issues, and macroeconomic pressures. Meanwhile, Microsoft, which just introduced a Copilot AI button to its Windows keyboard, has been forecasted to be one of the AI favorites in 2024 by Seeking Alpha.
Potential Trouble For Boeing
A new Boeing 737 MAX 9 recently had an explosive decompression during a flight, which has raised concerns about potential manufacturing issues. As a precautionary measure, Alaska Airlines has decided to ground all 65 of its Boeing 737 MAX 9 planes for maintenance and safety inspections. The investigation will likely center on the deactivated mid-rear door, which could limit the scope and impact of the issue.
Aerospace, defense and airline analyst Dhierin-Perkash Bechai believes that there may be a price reaction in Monday's trading session, but does not expect a widespread grounding of the Boeing 737 MAX. He anticipates some selling of Boeing stock due to ongoing issues and quality concerns, but also suggest that the longer-term picture for Boeing remains intact and that stock price weakness could offer a long-term entry point. The incident is seen as adding more pressure on aviation regulators and raising questions about Boeing's quality assurance process. Overall, his analysis suggests that while there may be short-term pressure on Boeing's stock price, the longer-term outlook remains intact, but with potential risks.
The week ahead: 8 Jan -12 Jan 2024
Buckle up because the first full trading week of 2024 is here, and it's packed with action that could sway the markets. All eyes are on the U.S. inflation report dropping on January 11th. Why? Because it's a big hint at whether the Fed might loosen its grip on monetary policy. The December CPI report is expected to show a 0.3% month-over-month climb in both headline inflation and the core rate.
But wait, there's more! We've got a slew of other data coming our way, including consumer credit, international trade balance, and the producer price index. And let's not forget the Q4 earnings season kicking off on January 12th. It's like the opening night for finance folks, with UnitedHealth Group (UNH), JPMorgan Chase (JPM), Bank of America (BAC), Wells Fargo (WFC), BlackRock (BLK), Delta Air Lines (DAL), and Bank of New York Mellon (BK) all stepping into the earnings spotlight.
Earnings
Tuesday, January 9 - The stage is set for Albertsons Companies (ACI), And get this – the options market is buzzing with a potential double-digit swing for Tilray Brands (TLRY).
Friday, January 12 - It's a big day with UnitedHealth Group (UNH), JPMorgan Chase (JPM), Bank of America (BAC), Wells Fargo (WFC), BlackRock (BLK), Delta Air Lines (DAL), and Bank of New York Mellon (BK) all revealing their latest financial health check.
Events
Inflation updates:
December U.S. Consumer Price Index (CPI) expected Thursday, 11 Jan, 8.30 am ET.
Producer Price Index (PPI) Friday, 12 Jan, 8.30am ET.
Conferences
J.P. Morgan Annual Healthcare Conference
The J.P. Morgan Healthcare Conference is a significant event in the healthcare industry where companies make announcements related to mergers and acquisitions, drug data results, and financial guidance updates. The conference is expected to focus on themes such as the macroeconomic backdrop, AI, value-based care, patient engagement, consumerization of healthcare, inflation/labor shortages, and M&A opportunities.
Notable companies to watch at the conference include:
Johnson & Johnson, Moderna, Abbott Laboratories, Baxter International, CVS Health, GSK plc, and Incyte.
Sources:
https://seekingalpha.com/article/4661471-wall-street-breakfast-what-moved-markets
https://seekingalpha.com/article/4661481-wall-street-breakfast-week-ahead
https://seekingalpha.com/article/4661482-boeing-new-explosive-max-and-stock-crisis
https://www.edwardjones.com/us-en/market-news-insights/stock-market-news/stock-market-weekly-update
https://www.schwab.com/learn/story/schwab-market-update
*Disclaimer: This information is provided for general information purposes only. Consider your investment objectives, financial resources and other relevant circumstances carefully before investing. This is not an invitation or an offer to invest, nor is it financial advice or a recommendation to buy or sell any investment.
