Economic Update 2-26-2024
- On the holiday-shortened week, economic data releases included another decline in the index of leading economic indicators, while existing home sales rose.
- Equities gained worldwide, led by the U.S. technology sector, improvement in developed market growth conditions, and stimulus in China. Bonds ticked higher as yields fell back a bit from the prior week. Commodities were mixed, with little change in crude oil prices.
U.S. stocks saw gains again last week, led by a Thursday rally driven by stronger-than-expected earnings, product demand, and forward-looking commentary from Nvidia, which continued to defy already high expectations. The focus is on artificial intelligence, and specialized chips leading the effort, buoying the entire stock market on promises of enhanced productivity.
By sector, technology and consumer staples led, each up 2%, led by Nvidia and Walmart, respectively, with materials and industrials gaining just below that mark. Energy lagged with only a meager return, with unstable crude oil prices during the week.
Foreign stocks saw gains as well, with new all-time highs in Europe and Japan. While the two areas remain mired in a recessionary growth slowdown, the S&P Global PMI manufacturing index rose back into expansion, while services pulled back but stayed in expansion—both generating positive sentiment for world growth in the near-term. In Japan, the Nikkei 225 index’s all-time high signifies a recovery from the burst asset bubble of the late 1980s. While a nod to improved fundamentals and sentiment for Japan in recent quarters, it remains a cautionary tale about high valuations and forward-looking return prospects, which can take longer to repair than many expect. Chinese stocks saw gains as stronger spending over the Lunar New Year holiday, as well as additional stimulus measures from the People’s Bank of China, including a significant lending facility and a larger-than-expected cut (-0.25%) in the key 5-year prime mortgage rate, in an aim of supporting that market.
Bonds gained last week, as yields ticked down slightly for longer maturities. Most major groups, including U.S. Treasuries, investment-grade corporates, and high yield, all performed similarly, as did foreign bonds with little change in the U.S. dollar index for the week. In a speech last week, Fed Governor Waller reiterated that they’ll need to see sustained progress on inflation before making a rate cut call (with Jan. CPI data not helping), but is optimistic that levels will get back to the 2% target. This has pushed some thinking that a half-dozen rate cuts or so in 2024 is too optimistic, with perhaps up to four being more realistic.
Commodities were mixed, with small gains in precious and industrial metals offset by declines in energy. Crude oil bounced around during the week, ending down around -2.5% to $76/barrel, with little news to move the needle meaningfully in either direction.
|
Period ending 2/23/2024 |
1 Week % |
YTD % |
|
DJIA |
1.30 |
4.10 |
|
S&P 500 |
1.68 |
6.91 |
|
NASDAQ |
1.41 |
6.67 |
|
Russell 2000 |
-0.77 |
-0.37 |
|
MSCI-EAFE |
1.44 |
2.49 |
|
MSCI-EM |
1.23 |
0.57 |
|
Bloomberg U.S. Aggregate |
0.25 |
-1.77 |
|
U.S. Treasury Yields |
3 Mo. |
2 Yr. |
5 Yr. |
10 Yr. |
30 Yr. |
|
12/31/2023 |
5.40 |
4.23 |
3.84 |
3.88 |
4.03 |
|
2/16/2024 |
5.44 |
4.64 |
4.29 |
4.30 |
4.45 |
|
2/23/2024 |
5.46 |
4.67 |
4.28 |
4.26 |
4.37 |
Sources: LSA Portfolio Analytics, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Deutsche Bank, FactSet, Financial Times, Goldman Sachs, JPMorgan Asset Management, Kiplinger’s, Marketfield Asset Management, Minyanville, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, Payden & Rygel, PIMCO, Rafferty Capital Markets, LLC, Schroder’s, Standard & Poor’s, The Conference Board, Thomson Reuters, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wells Capital Management, Yahoo!, Zacks Investment Research. Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return/excluding dividends. Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.
The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness. All information and opinions expressed are subject to change without notice. Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.