Weekly Market Update | Week 10, 2024


There were two significant anniversaries recently.

Last week marked the 15 year anniversary of the market bottom during the global financial crisis. If you had invested in the S&P 500 on October 9th 2007 (which happens to be the all-time high before the GFC) the total return would be 227% without dividends. During that time period you would have also experienced a 55% drawdown and waited four and a half years to break even from that high in October 2007.

The second is of course, is the four-year marker since the national shutdown on March 15th 2020. Things looked pretty grim at that moment. Fast forward to today and the market is up over 100% and COVID-19 in many cases is a distant memory.

US equities were lower for the week, with the Nasdaq posting its second consecutive weekly drop, and the small-cap Russell saw its worst week since the opening of 2024. Treasuries were notably weaker, with yields for most maturities seeing a five-day run higher (the 10-year yield was up more than 20bp). The dollar was stronger on the major crosses, particularly vs the yen. Gold finished down 0.1% for the week. WTI crude settled up 4.1%.

There was a big focus on the week’s data releases, primarily a hotter-than-expected reading for February core CPI. However, there were more constructive takes on the report’s composition, particularly regarding the lower OER and supercore inflation measures. February PPI was also hotter on both headline and core measures.

The latest initial and continuing jobless claims were below consensus, speaking to the resilience of the labor market. In contrast, the February retail sales report was weaker across the board (with some attention on downward revisions), while the NFIB small-business optimism index was softer, with respondents flagging inflationary pressures and weaker hiring plans. Preliminary UMich consumer sentiment and inflation expectations were little changed.

Beyond the data, it was a relatively uneventful week. There was a bit of implied debate about the respective bull and bear cases, with the more bullish threads being increasingly qualified. The market still seems to be factoring in strong economic growth (fewer recession mentions on earnings calls), a resilient (though cooling) labor market, solid corporate earnings, and a promising (if bumpy) disinflationary trend.

A key focus remains expectations for coming central bank easing, though this week’s somewhat hotter inflation reports did not generate a big shift in market bets for a first Fed cut in June. The past week also saw some pushback against “bubble” talk, with commentators noting broadening leadership beyond the tech giants; SocGen discussed “rational optimism” vs fears of irrational exuberance. 

AI optimism remains a key tailwind, though there are also some worries about what may happen should that momentum unwind.

The bear case seemed to get somewhat more oxygen this week, particularly given the data suggesting that the disinflationary path is likely to remain bumpy, at best. Worries about the “last mile” down to the Fed’s 2% target have remained present, and some were concerned by the jump in long-term inflation expectations in the NY Fed’s latest consumer survey. Control-group sales were flat in the latest retail sales report, generating more talk about the wallet-share shift to services, where inflation has proven stickier. 

Next week brings the 19-20 March FOMC meeting. While rates are expected to remain unchanged, there will be some attention on whether members trim their forecasts for rate cuts this year (consensus seems to think forecasts will hold at 75bp of loosening). The Bank of Japan will also be in focus, with some expectations it may hike and move away from yield-curve control next week. It will be a fairly light week of economic updates, though several housing indicators are on the calendar.

Fixed Income

Yield Curve

Dec FOMC Statement      Balance Sheet Reduction Plan       Credit, Liquidity and Balance Sheet    Federal Reserve Dot Plots  

Treasury.gov yields    FOMC Policy Normalization Statement     Longer- Run Goals Jan 2022

Foreign Exchange Market

Energy Complex 

The Baker Hughes rig count was up 7 this week. There are 629 oil and gas rigs operating in the US – Down 125 from last year.

Metals Complex 

Employment Picture 

Weekly Unemployment Claims – Released Thursday 3/14/2024 – In the week ending March 9, the advance figure for seasonally adjusted initial claims was 209,000 a decrease of 1,000 from the previous week’s revised level. The 4-week moving average was 208,000 a decrease of 500 from the previous week’s revised average.

February Jobs Report –  BLS Summary – Released 3/8/2024 –  The US economy added 275k nonfarm jobs in February and the Unemployment rate increased 0.2% to 3.9%. Average hourly earnings increased 5 cents to $34.57.  Hiring highlights include +67k Healthcare, +52 Government, and +24k Social Assistance .

  • Average hourly earnings increased 5 cents/0.1% to $34.57.
  • U3 unemployment rate increased 0.2% to 3.9%. U6 unemployment rate increased 0.1% to 7.3%.
  • The labor force participation rate was unchanged at 62.5%.
  • Average work week increased 0.1 to 34.3 hours.

Job Openings & Labor Turnover Survey JOLTS – Released 3/6/2024 – The number of job openings changed little at 8.9 million on the last business day of January, the U.S. Bureau of Labor Statistics reported. Over the month the number of hires and total separations was little changed 5.7 million and 5.3 million, respectively. Within separations, quits (3.4 million) and discharges (1.6 million) changed little.

Employment Cost Index – Released 1/31/2024 – Compensation costs for civilian workers increased 0.9% for the 3-month period ending in December 2023. The 12-month period ending in December 2023 saw compensation costs increase by 4.2. The 12-month period ending December 2022 increased 5.1%. Wages and salaries increased 4.3 percent over the 12-month December 2023 and increased 5.1 percent for the 12-month period ending in December 2022. Benefit costs increased 3.8 percent over the 12-month period ending December 2023 and increased 4.9 percent for the 12-month period ending in December 2022. This report is published quarterly.

This Week’s Economic Data- Blue links take you to data source

Industrial Production and Capacity Utilization – Released 3/15/2024 – Industrial production increased 0.1% in February following a 0.5% decline in January. Manufacturing increased 0.8%. Utilities output decreased 7.5%. Mining increased 2.2%. Capacity utilization was unchanged at 78.3% in February, a rate that is 1.3% below its long-run average.

Producer Price Index – Released 3/14/2024  The Producer Price Index for final demand increased 0.6 percent in February, seasonally adjusted. Final demand increased 0.3 percent in January. On an unadjusted basis, the index for final demand moved up 1.6 percent for the 12 months ended in February.

Retail Sales– Released 3/14/2024 – Headline retail sales increased 0.6% in February and are up 1.5% above February 2023.

Consumer Price Index – Released 3/12/2024  The Consumer Price Index for All Urban Consumers increased 0.4 percent in February on a seasonally adjusted basis, after increasing 0.3 percent in January. Over the last 12 months, the all-items index increased 3.2 percent before seasonal adjustment.

Recent Economic Data – Blue Links bring you to data source

U.S. Trade Balance – Released 3/7/2024 –  The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced that the goods and services deficit was $67.4 billion in January, up $3.3 billion from $64.2 billion in December. January exports were $257.2 billion, $0.3 billion more than December exports. January imports were $324.6 billion, $3.6 billion more than December imports. The January increase in the goods and services deficit reflected an increase in the goods deficit of $3.0 billion to $91.6 billion and a decrease in the services surplus of $0.3 billion to $24.2 billion.

Consumer Credit – Released 3/7/2024  Consumer credit increased at a seasonally adjusted annual rate of 4.7 percent in January. Revolving credit increased at an annual rate of 7.6 percent, while nonrevolving credit increased at an annual rate of 3.6 percent.

PMI Non-Manufacturing Index – Released 3/5/2024 – Economic activity in the services sector expanded in February for the 14th consecutive month as the Services PMI® registered 52.6 percent, 0.8 percentage points lower than January’s reading of 53.4 percent.

U.S. Construction Spending– Released 3/1/2024 – Construction spending during January 2024 was estimated at a seasonally adjusted annual rate of $2,102.4 billion, 0.2 percent below the revised December estimate of $2,105.8 billion. The January figure is 11.7 percent above the January 2023 estimate of $1,882.2 billion.

PMI Manufacturing Index – Released 3/1/2024 – The February Manufacturing PMI registered 47.8 percent, down 1.3 percent from January. The manufacturing sector continued in contraction for the 16th consecutive month following one unchanged month and 28 months of growth prior to that. The New Orders Index moved back into contraction territory at 49.2 percent, 3.3 percentage points lower than the figure of 52.5 percent recorded in January. The Production Index reading of 48.4 percent is a 2.0-percentage point decrease compared to January’s figure of 50.4 percent.

Chicago PMI – Released 2/29/2024 – Chicago PMI remained in contraction territory in February declining to 44.0 points down from 46.0 points in January. The latest reading indicated that Chicago’s economic activity contracted for the third consecutive month in February, and at the fastest rate in seven months.

Personal Income – Released 2/29/2024 – Personal income increased $233.7 billion (1.0 percent at a monthly rate) in January. Disposable personal income (DPI) increased $67.6 billion (0.3 percent). Personal consumption expenditures (PCE) increased $43.9 billion (0.2 percent).

Second Estimate of 4th Quarter 2023 GDP – Released 2/28/2024 – Real gross domestic product (GDP) surpassed expectations and increased at an annual rate of 3.2 percent in the fourth quarter of 2023, according to the “second” estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 4.9 percent. The GDP “second” estimate is based on source data that are more complete than that released in the “advance” estimate. The update primarily reflected a downward revision to private inventory investment that was partly offset by upward revisions to state and local government spending and consumer spending. The increase in real GDP reflected increases in consumer spending, exports, state and local government spending, nonresidential fixed investment, federal government spending, private inventory investment, and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased.

Durable Goods Released 2/27/2024 – New orders for manufactured durable goods in January, down three of the last four months, decreased $18.0 billion or 6.1 percent to $276.7 billion, the U.S. Census Bureau announced today. This followed a 0.3 percent December decrease. Excluding transportation, new orders decreased 0.3 percent. Excluding defense, new orders decreased 7.3 percent. Transportation equipment, also down three of the last four months, led the decrease, $17.4 billion or 16.2 percent to $89.8 billion.

Consumer Confidence – Released 2/27/2024 – Consumer Confidence decreased in February, down to 106.7 from 110.9 in January. Expectations decreased from 81.5 to 79.8. February’s decrease in consumer confidence interrupted a three-month rise, reflecting persistent uncertainty about the US economy.

New Residential Sales  – Released 2/26/2024 – Sales of new single‐family houses in January 2024 were at a seasonally adjusted annual rate of 661,000, according to estimates released jointly by the U.S. Census Bureau and the Department of Housing and Urban Development.  This is 1.5 percent above the revised December rate of 651,000 and is 1.8 percent above the January 2023 estimate of 649,000. The median sales price of new houses sold in January 2024 was $420,700.  The average sales price was $534,300.  At the end of January, the seasonally adjusted estimate of new homes for sale was 456,000, a supply of 8.3 months at the current sales rate.

Existing Home Sales – Released 2/22/2024 – The Existing home sales increased in January following a decrease in December. Existing home sales in January increased 3.1% from December but fell 1.7% year over year. Existing home sales increased to 4.00 million in January seasonally adjusted. The median price of existing homes for sale increased to a record high of $379,100.

Housing Starts – Released 2/16/2024 – January housing starts came in at 1,331,000, 14.8% below the December estimate and is 0.7% below the January 2023 rate. Building permits were 1.5% below the December rate at $1,493,000 but 8.6% above the January 2023 rate.

Next week we get data on Housing Starts and Existing Home Sales.

Disclaimer

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Data Sources: 

Conference Board Economic Indicators   Bureau of Economic Analysis (BEA)   Congressional Budget Office (CBO)     U.S. Bureau of Labor Statistics (BLS)    Federal Reserve Economic Data (FRED Charts)

CME Fed Watch   U.S. Treasury – Yields   U.S. Census Bureau    Institute for Supply Management (ISM)    Weekly DOL Employment Data    BLS Monthly Jobs Report    JOLTS      All capital in one visualization 2020

US Energy Admn (EIA)   BLS Consumer Price Index CPI      BLS Producer Price Index PPIAtlanta Fed GDPNOW    NY Fed Nowcast GDP     US Census Bureau Housing Starts   U.S. Energy Admn

Consumer Credit  USCB Retail Sales   Construction Spending      Federal Reserve Dot Plots 2017   NY Empire Index    Philadelphia Federal Reserve   P/E Ratio Data -Yardeni Research

Technical Analysis Info: Koyfin.com  StockCharts.com – Financial Charts    Exponential vs Simple Moving Average

Other links: 1973 Arab Oil Embargo    Hunt Brothers Silver    Asian Contagion   Long-Term Capital bailout