Hello, this is Josh Waynick, Investment Strategist at Fifth Third Bank
Major US equity indices were down this past week, bucking a trend of 9 weeks of gains for the S&P 500. Specifically, the S&P 500 fell 1.5%. The Nasdaq Composite fell 3.2% and the Dow Jones Industrial Average fell 0.6% over the first week of 2024. The poor news for equity investors was shared by bond investors as the U.S. Treasury yield curve saw rates rise across all term points. The U.S. 10-year Treasury Note yield rose to 4.05% with the U.S. 2-year Treasury Note yield rising to 4.39%. As a result, the 2-year/10-year U.S. Treasury Curve remained inverted and ended the week at 34 basis points inverted. The US Dollar index, measuring the relative strength of the US Dollar against a basket of global currencies, ended the week higher by 1.1%. Gold fell last week by 0.9%, ending the week at $2,045 per ounce. Additionally, West Texas Intermediate crude oil rose for the week by 3.1%, but remains well below the recent high’s observed this past September. Specifically, at the end of Friday, WTI sat at $73.90 per barrel.
Looking back at equity market, the first week’s poor performance came on the back of a very strong final quarter for equity and bond investors. The fourth quarter of 2023 saw the S&P 500 return investors over 11%. This was the best 3 month return on the S&P 500 since February through April of 2021. Additionally, the strong fourth quarter pushed the yearly performance of the S&P 500 to 24%, which makes 2023 the fourth year in the last seven years with yearly returns over 20% for the S&P 500.
Circling back to the Economy, the major news from last week came on Friday when the most recent labor report came out. Investors digested a beat on headline jobs added to the economy with 216 thousand jobs added. Additionally, it was reported that year over year wages increased to 4.1%, which was above market expectations. Following the report, the market expectations on prospective interest rates cuts from the US Central Bank held steady with interest rate cuts expected to start in March.
The most recent earnings season has begun, however as of this past Friday only 21 companies in the S&P 500 have reported, included 4 companies this past week. In the week ahead 8 companies will join them including many of the largest financial institutions.
Shifting our lens to upcoming economic news, the week ahead will give investors a new data point on the inflation front. This Thursday the latest consumer price index data is set to come out. Current expectations are for a slight increase to 3.2%, up from last month’s 3.1%.
That concludes this week’s Economic Beat. We are off next week for the holiday and will report back to you in two weeks time.
