In the aftermath of a consecutive decline, a resurgence in the stocks market was triggered by a rally in some of the world's largest technology companies. Traders found themselves navigating through the latest economic data and parsing statements from Federal Reserve officials for insights into the central bank's future moves.
The S&P 500, following a dip, rebounded as volatility in the bond market eased. Notably, megacap stocks outperformed, with Apple Inc. receiving a boost from an analyst upgrade. Chipmakers experienced a surge, fueled by optimism stemming from Taiwan Semiconductor Manufacturing Co., hinting at a potential global tech recovery in 2024.
Jobless claims data, indicating strength in the labor market, did little to shake traders, who remained focused on the broader market dynamics. Bond yields initially rose post-report, but the momentum subsided swiftly. Federal Reserve Bank of Atlanta President Raphael Bostic maintained his stance that rate cuts are unlikely until the third quarter, while his Philadelphia counterpart Patrick Harker expressed expectations that inflation would continue to trend toward the 2% target.
Chris Zaccarelli at Independent Advisor Alliance emphasized the difficulty in adopting a bearish outlook given the underlying strength of the U.S. economy. He noted pervasive pessimism and doubt in the stock market and economy, considering it a contrarian signal. Zaccarelli cautioned against becoming too optimistic, highlighting that the market remains susceptible to shocks until the last skeptic is converted.
The S&P 500 hovered around 4,750, and the Nasdaq 100, dominated by tech stocks, saw a gain of over 1%. Chipmakers' index recorded a substantial 3% climb. Treasury two-year yields, indicative of immediate reactions to Fed moves, settled around 4.35%, and the dollar exhibited fluctuations.
Fawad Razaqzada at City Index and Forex.com suggested that despite the apparent calm in the stock market rebound, conditions could change. He pointed to a growing perception that major central banks might not cut interest rates as much or as soon as initially anticipated.
Chris Larkin at E*Trade from Morgan Stanley highlighted the ongoing narrative of robust economic data potentially delaying rate cuts. Larkin suggested that the Federal Reserve would likely stick to its higher-for-longer stance until consistent softening in economic indicators, especially in the labor market, emerges.
Despite experiencing its best winning streak in two decades, the S&P 500 faced obstacles in 2024, unable to surpass its all-time closing record set two years prior. However, a technical gauge measuring buying or selling momentum indicated that bulls were still active in the market.
Dan Wantrobski at Janney Montgomery Scott foresaw a "bumpy path" ahead, citing conflicting market internals and technical indicators. Matt Maley at Miller Tabak + Co. expressed concerns about the return of a "narrow stock market" but found hope in positive developments in the chip industry, considering it a potential catalyst for pushing the market higher.
Bespoke Investment Group's data suggested that investors anticipating a broader market in 2024 might be disappointed, as the cap-weighted S&P 500 declined marginally, while its equal-weighted version experienced a more pronounced decrease. The performance spread between the two indexes widened to 1.91 percentage points, the largest gap favoring the cap-weighted index since at least 1990.
Despite a "decent rebound" on Thursday, Craig Erlam at Oanda cautioned that more data was needed to justify optimism. He pointed out a divergence between market expectations and the data released in the early months of 2024, raising questions about the sustainability of positive sentiment.
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