Hold on to your hats, investors! After a thrilling nine-straight week of gains in 2023, the stock market has hit a bit of turbulence. The Vanguard Mega Cap Growth ETF (MGK) saw a notable drop of 3.0%, outpacing the S&P 500’s decline of 1.5%.
And let’s talk about Apple (AAPL) – it took a nearly 6.0% nosedive following two analyst downgrades and some unsettling news about a potential DOJ antitrust case.
Utilities Sector: This sector brightened up with a 1.8% gain this week, a stark contrast to its 10.2% fall last year.
Energy Sector: It saw a 1.1% rise this week, bouncing back from a 4.8% decline in 2023.
Consumer Staples: Eked out a modest 0.03% gain this week, following a 2.2% drop last year.
In contrast, the information technology sector fell by 4.1%, and the consumer discretionary sector dipped by 3.5%, both sectors reversing their previous year’s outperformance.
Bonds and Interest Rates: The Rising Tide
Interest rates have been climbing, with the 10-year yield jumping 16 basis points to 4.04%. This increase is partly due to the Federal Reserve’s less dovish stance than many had hoped for. The December Employment Situation Report and the ISM Services PMI stirred the pot further, injecting uncertainty about the Fed’s future rate cut plans.
Market Movers and Shakers
Apple (AAPL): This tech giant’s shares fell more than 3.0% after a Barclays downgrade.
Russell 3000 Growth Index: Experienced a 2.8% decline, in contrast to the Russell 3000 Value Index’s milder 0.6% fall.
Economic Data Reports: Reading Between the Lines
December Employment Situation Report: Nonfarm payrolls and average hourly earnings exceeded expectations.
December ISM Services PMI: Revealed a more significant than expected slowdown in service sector growth.
What Does This Mean for Investors?
Investors, it’s time to buckle up. The market’s recent shifts suggest a reevaluation of expectations. Strong employment numbers might limit the Fed’s rate cuts, while the service sector’s slowdown could align with the current rate-cut forecasts.
In the first week of 2024, oil saw a modest gain of 1%, buoyed by escalating tensions in the Middle East. However, oil prices are still feeling the heat from a challenging 2023, where crude prices dipped by about 10%.
The latest report from the US Energy Agency presented a mixed picture: while crude oil inventories decreased by 5.5 million barrels, there was a notable increase in inventories of refined products, especially gasoline. This reflects the fragile state of US consumption. Price-wise, Brent is hovering around $78.60, and WTI is at approximately $73.50.
The year 2024 hasn’t started on a strong note for copper and other industrial metals, which are currently on a downward trend. A strengthening dollar is putting pressure on this sector, pushing copper prices below $8,400 per metric ton in London. Nickel is also losing ground, affected by ramped-up production in Indonesia.
In the realm of precious metals, gold has retreated, impacted by rising bond yields and a robust US employment report. Despite these challenges, the gold is maintaining its stance, trading at around $2040.
Crypto
Since the dawn of the new year, Bitcoin has experienced a remarkable surge, soaring to $46,000. This impressive climb was primarily driven by swirling rumors suggesting the SEC’s impending approval of a Bitcoin ETF.
However, this upward trajectory was abruptly halted by opposing rumors, which clarified that such approval hadn’t been granted yet. As a result, Bitcoin retreated to its current standing of $43,500. The market now waits in anticipation, eager for more concrete information. Amid this uncertainty, MicroStrategy, known for holding the world’s largest Bitcoin portfolio, has further solidified its position by acquiring an additional 14,000 bitcoins.
Thursday, January 11: CPI (MoM) (December)
Friday, January 12: PPI (MoM) (December)
Earnings
January 11th is a date to circle in your calendars, folks. The U.S. inflation report is set to drop, and it’s a biggie. Why, you ask? Well, it’s all about understanding the twists and turns of monetary policy. The December CPI report is expected to show a 0.3% month-over-month increase in both headline inflation and the core rate. But that’s not all – we’ve got other key data releases like consumer credit, international trade balance, and the producer price index. These numbers aren’t just digits; they’re the pulse of the economy!
Earnings Season: The Main Event
Hold onto your hats because January 12th marks the official start of the Q4 earnings season. And boy, do we have a lineup!
Earnings Spotlights
January 8: Jefferies Financial Group (JEF) and Helen of Troy (HELE) step up to the plate.
January 9: We’ve got Albertsons Companies (ACI), PriceSmart (PSMT), and Acuity Brands (AYI) in the spotlight. And keep an eye on Tilray Brands (TLRY) – options trading suggests a wild ride for their share price.
January 10: KB Home (KBH) takes center stage.
January 11: Infosys (INFY) – a tech giant, folks!
January 12: The heavy hitters come out swinging. We’re talking 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).
Investors should anticipate focusing on key sectors like Information Technology, Pharmaceuticals, FMCG, Banking, Automobile, Real Estate, and Infrastructure, which are expected to deliver strong performances due to favorable conditions and strategic initiatives.
“We're still expecting the sequential growth rates to drop sharply over the rest of 2024 and remain low through early 2025,” Morningstar chief US economist Preston Caldwell wrote in his July economic outlook. He's forecasting 2.4% GDP growth for 2024 and 1.4% for 2025.
Rising or falling interest rates affect consumer and business psychology. When interest rates are rising, both businesses and consumers will cut back on spending. This will cause earnings to fall and stock prices to drop.
As a whole, analysts are optimistic about the outlook for stock prices in 2024. The consensus analyst price target for the S&P 500 is 5,090, suggesting roughly 8.5% upside from current levels.
The S&P 500 will plunge 32% in 2025 as a recession finally hits the US economy, BCA Research predicts. The firm said the Fed will fail to prevent a recession as it takes its time cutting interest rates. Rising unemployment and constrained credit will curb consumer spending, worsening the downturn.
The MBA forecast suggests that 30-year mortgage rates will fall to the 6.6% by the end of 2024, while Fannie Mae and NAR predict rates will end the year around 6.7%.
Goldman Sachs analysts' forecast is neutral. In 2024, the Dow Jones rate is expected to trade between $37,000 and $38,000. Bank experts predict that corporate income will remain at the same level, which will support stocks during a recession.
As a general rule of thumb, when the Federal Reserve cuts interest rates, it causes the stock market to go up; when the Federal Reserve raises interest rates, it causes the stock market to go down. But there is no guarantee as to how the market will react to any given interest rate change.
Value stocks. Value stocks may do well in a higher interest rate environment as investors look for companies with strong cash flows and expect to see immediate profitability in their underlying holdings. ...
Cost of borrowing: Higher interest rates increase the cost of borrowing for companies, which can reduce their profits and future cash flows. Lower profits can lead to lower stock valuations and stock prices. Consumer spending: Higher interest rates can discourage consumer spending as borrowing becomes more expensive.
Key Takeaways. While holding or moving to cash might feel good mentally and help avoid short-term stock market volatility, it is unlikely to be wise over the long term. Once you cash out a stock that's dropped in price, you move from a paper loss to an actual loss.
The survey's median projection is for the S&P 500 to finish 2024 at 5,606, almost 3% above Friday's close. That's a cheerier view than Wall Street strategists' median target , which is for the index to be little changed from current levels at year-end.
According to our current DAWN stock forecast, the value of Day One Biopharmaceuticals, Inc. shares will drop by -8.03% and reach $ 14.72 per share by July 21, 2024. Per our technical indicators, the current sentiment is Bullish while the Fear & Greed Index is showing 39 (Fear).
Target price started in 2024 at $142.42. Today, Target traded at $152.81, so the price increased by 7% from the beginning of the year. The forecasted Target price at the end of 2024 is $162 - and the year to year change +14%. The rise from today to year-end: +6%.
The survey's median projection is for the S&P 500 to finish 2024 at 5,606, almost 3% above Friday's close. That's a cheerier view than Wall Street strategists' median target , which is for the index to be little changed from current levels at year-end.
Analysts remain bullish on Meta. Of the 67 analysts following the stock, 84% rate Meta a buy, according to FactSet. For the full year, analysts project that Meta's revenue will rise 17.9% to $159 billion in 2024, after climbing 15.7% last year, according to FactSet.
With 2024 more than half completed, the U.S. stock market is on pace for its second consecutive year of strong gains. The primary market indices, the S&P 500, the Dow Jones Industrial Average and the NASDAQ Composite have all hit new highs.
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