After snapping a nine-week streak to start 2024, stocks got back to their winning ways last week.
All three major indexes advanced during the first full trading week of the year, led by a 3% gain for the Nasdaq Composite (^IXIC), while the S&P 500 (^GSPC) finished the week’s trading less than 13 points, or about 0.3%, away from a record high. To cap the week, Microsoft (MSFT) also overtook Apple (AAPL) as the world’s most valuable company.
In the week ahead, investors will look to keep the momentum going in a holiday-shortened week.
With US markets closed Monday in observation of Martin Luther King Jr. Day, results from the financial sector and Wednesday’s retail sales data should serve as the main calendar catalysts.
Retail sales are expected to rise 0.4% in December, an increase from the 0.3% gain in November, as US consumers continue to power a surprisingly durable economic expansion.
Michael Gapen, an economist at Bank of America, wrote that the firm expects the government to apply seasonal adjustments to December’s data that will lead to a “robust” retail sales number.
“Stepping back,” Gapen added, “we think spending is healthy but not surging.” Right now, the firm sees fourth quarter GDP tracking toward an annualized growth rate of 1.2%.
Elsewhere on the economic calendar, Thursday’s initial jobless claims data and a look at consumer sentiment from the University of Michigan out Friday will warrant a close look from investors.
Away from the earnings and economic calendar, Monday’s Iowa caucuses will mark the official start of the 2024 US presidential election. On the geopolitical front, rising tensions in the Red Sea — with the US and its allies carrying out airstrikes on consecutive days in Yemen last week — are garnering increased attention from investors.
A sign supporting Republican presidential candidate former President Donald Trump is displayed on January 11, 2024 in Adel, Iowa. Iowa voters are preparing for the Republican Party of Iowa’s presidential caucuses on January 15. (Photo by Kevin Dietsch/Getty Images) (Kevin Dietsch via Getty Images)
The coming week’s key earnings reports are expected Tuesday morning, with investment banks Goldman Sachs (GS) and Morgan Stanley (MS) set to offer results after a challenging year for the dealmaking business that features in their results.
Ken Leon, research director at CFRA, told Yahoo Finance Live on Friday, “I think the investment banking story [next week] will be, again, that we hit the trough of the cycle last year.”
Friday’s earnings season kickoff also featured results from Delta Air Lines (DAL), which disappointed investors and sent shares of the airline down nearly 9% and dragged peers United Airlines (UAL) and American Airlines (AAL) lower.
In a client note on Friday, Nancy Vanden Houten, lead US economist at Oxford Economics, flagged Red Sea-related disruptions as presenting an “upside risk” to the firm’s inflation forecasts.
With investors focused on how each incremental piece of inflation data could alter the Federal Reserve’s plans to cut interest rates this year, this past week’s data offered a marginal increase in conviction this process will begin in March.
“We have adjusted our baseline assumptions to assume that the FOMC will initiate every-other-meeting incremental cuts starting in March, two meetings earlier than before,” wrote Barclays economists led by Jonathan Millar on Friday.
He added: “This mainly reflects our downward revisions to core PCE price inflation, which significantly boost the likelihood that the FOMC will continue to see relatively soft monthly prints from this measure through February. Nonetheless, we regard March’s outcome as a much closer call than the ~80% likelihood being priced by markets.”
Barclays also sees rates proceeding at a “much more gradual” pace than markets are pricing in — Millar and team see rates falling 1% by the end of 2024, with markets expecting closer to 1.5% worth of rate cuts. The current fed funds rate stands in a range of 5.25%-5.50%.
Earnings themes to watch
The financial sector has taken the spotlight to begin earnings season.
But the big story for markets in 2023 focused on tech stocks and, in particular, the “Magnificent Seven” megacap leaders that powered the Nasdaq to a gain north of 40%.
Later this month, results from these names and other tech stalwarts will start to trickle in.
And how this sector performs will be of particular interest to investors as valuations for the Technology (XLK) sector have surged in anticipation of an AI-driven profit cycle.
At the end of 2023, data from Bank of America showed the Technology sector’s forward P/E ratio stood at 27, the second highest among all S&P 500 sectors — only Real Estate (XLRE), which saw valuations rise as earnings for the sector fell sharply, traded at a higher valuation (39). The S&P 500 as a whole traded at 19.8 times next year’s expected earnings.
With Technology accounting for more than 28% of the S&P 500’s market cap, these results will exert an outsized influence on the index’s overall direction.
In a note published Friday, John Butters at FactSet highlighted negative guidance offered by S&P 500 companies for fourth quarter results stood slightly above the recent five- and 10-year averages, with 111 members of the index cautioning the Street about forthcoming results. When looking at these warnings by sector, Technology is a standout.
FactSet’s data shows 25 members of the tech sector cautioned that earnings would miss forecasts in the fourth quarter, more than the 10-year average of 19 members of sector issuing a similar warning. Overall, there are 64 S&P 500 members in the sector.
Now, when it comes to the Magnificent Seven names in particular, sector-level nuance becomes a challenge — Meta Platforms (META) and Alphabet (GOOG, GOOGL) are components in the Communication Services (XLC) sector, while Amazon (AMZN) and Tesla (TSLA) are classified as Consumer Discretionary (XLY) names.
But all of these stocks are components in the Nasdaq, the market’s bellwether for investor sentiment.
And with the “tech trade” taking on a monolithic role in the mind of many investors last year, the party won’t really get started for fourth quarter earnings season until reports from these names start rolling in.
Weekly calendar
Monday
Economic data:Markets closed for Martin Luther King, Jr. Day
Earnings:Markets closed for Martin Luther King, Jr. Day
Tuesday
Economic data: NY Fed Empire Manufacturing, January (-4 expected, -14.5 previously)
Earnings: Goldman Sachs (GS), Morgan Stanley (MS), PNC Financial (PNC), Interactive Brokers (IBKR)
Wednesday
Economic data: Retail sales, December (+0.4% expected, +0.3% previously); Retail sales, ex auto and gas, December (+0.3% expected, +0.6% previously); MBA Mortgage Applications, week of Jan. 12 (+9.9% previously); Import price index, December (-0.6% expected, -0.4% previously); Export price index, December (-0.7% expected, -0.9% previously); Industrial production, December (0% expected, +0.2% previously); Business inventories, November (-0.1% expected, -0.1% previously); Federal Reserve Beige Book
Earnings: Charles Schwab (SCHW), Alcoa (AA), Discover (DFS), U.S. Bancorp (USB), Kinder Morgan (KMI), Citizens Financial (CFG), Prologis (PLD)
Thursday
Economic data: Initial jobless claims, week of Jan. 13 (205,000 expected, 202,000 previously); Housing starts, December (-8.7% expected, +14.8% previously); Building permits, December (+0.9% expected, -2.5% previously); Philly Fed business outlook, January (-7 previously, -12.8 previously)
Earnings: PPG (PPG), Fastenal (FAST), Bank OZK (OZK), KeyCorp (KEY), J.B. Hunt (JBHT), M&T Bank (MTB), Northern Trust (NTRS)
Friday
Economic data: University of Michigan consumer sentiment, Jan. preliminary (69.3 expected, 69.7 previously); University of Michigan 1-year inflation expectations, January (3.1% previously); Existing home sales, December (+0.3% expected, +0.8% previously)
Earnings: Travelers (TRV), State Street (STT), Regions Financial (RF), Ally (ALLY), Comerica (CMA), Fifth Third (FITB), Huntington Bancshares (HBAN)
NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.
Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.
“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”
Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.
Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.
Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.
Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.
In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.
The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.
And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
