 | AUTHOR: Jason Roque, CFP®, APMA®, AWMA® TITLE: Investment Adviser Rep – CCO TAGS: S&P 500, NASDAQ, Dollar, Rates, FRB |
Stock markets gained on the week despite rising interest rates. Will that come back to haunt equities?
Monday S&P 500 -% | NASDAQ -%
Happy Martin Luther King Jr. Day!
Tuesday S&P 500 0.37% | NASDAQ 0.19%
The week opened to higher interest rates and a stronger dollar. The markets continued to price in a less accommodative Federal Reserve Bank (FRB) for 2024. They will still be accommodative, just not as much as investors originally expected. This is likely to happen as the result of a stronger economy…
Wednesday S&P 500 0.56% | NASDAQ 0.59%
Retail sales came in stronger than expected, by double. This data further signals an economy that is holding up in the face of higher interest rates. Central bankers made indications that a measured approach to rate cuts is prudent. This cautious approach is not the six rate cuts the market have been calling for.
Thursday S&P 500 0.88% | NASDAQ 1.35%
Jobs data out Thursday indicated that the job market continues to be resilient. Crude oil inventories continued to shrink. The momentum sent yields higher and caused the dollar to strengthen. Typically, that would also mean losses for the equity markets. Semiconductor earnings and forecast on the day signaled an improved tech environment. This led stocks higher.
Friday S&P 500 1.23% | NASDAQ 1.70%
Existing homes sales moderated 1%. Michigan Consumer sentiment is projected to heat up substantially. This combination should have signaled a weaker equity market. Rather, the Tech momentum from Thursday continued into Friday.
Conclusion S&P 500 1.17% | NASDAQ 2.26%
Equity markets rallied on the week. This came despite a readjusting of market expectations around FRB rate cut activity. The fixed income market behavior should have signaled a weaker equity market, but a tech rally kept negativity at bay. This may swing back in the weeks to come, but for now it has staved off the move. The rise in interest rates tells us something that we know and should always remember “Don’t fight the Fed.” A mantra that has existed for a long time, but the markets seem to get it wrong occasionally. Earnings season is underway, which should revitalize equity markets over the next four to six weeks. Interest rate expectation adjustment, however, may temper some of that growth.
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