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Weekly Market Brief: January 29, 2024

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Week in Review

Stocks moved higher for the 12th time in the last 13 weeks, with the S&P 500 notching a 1% gain and leading the major indexes. Crude oil was the big winner though, as it jumped 6.3% for its best weekly gain since last September. Gold continues to consolidate above $2000/oz, and Bitcoin is trying to stabilize above 40,000. The US Dollar Index, meanwhile, tacked on a second straight week of gains.

King Consumer

All throughout 2023, most experts believed an economic slowdown was inevitable. Eventually, higher interest rates would bite into spending power, excess savings would run dry, inflation would curb affordability, and the party would come to an end. Those experts made a mistake.

You never count out Patrick Mahomes in the playoffs, and you never underestimate the ability of the US consumer to keep spending money. Last week, the Bureau of Economic Analysis reported that the US economy grew 3.3% in the fourth quarter of 2023, well above the consensus expectation of 2.0%, and driven in large part by continued strength in personal consumption.

At the same time, inflation continues to drift lower. The year-over-year Core PCE Deflator dropped to 2.9% in December, its lowest reading in nearly 2 years. And on a 3-month annualized basis, that measure of prices has been at or near the Federal Reserve’s 2% annual target since July. With what looks more and more like a successful soft landing every day, Jerome Powell & Co. will meet this week to discuss their progress on inflation and their plans for normalizing monetary policy over the balance of the year.

Market Internals

Breadth was a concern for most market watchers throughout 2023, as the rally in growth stocks obscured lackluster performances from value-oriented names during the spring and late-summer months. Index-level declines in August, September, and October had breadth as weak as it had been all year. A surge in prices to end the year laid any lingering concerns about participation to rest. 70% of S&P 500 members are above their 200-day moving average.

Long-term trends are healthiest in the Financials, Industrials, and Information Technology sectors, where more than 85% of constituents have moved above their long-term moving averages. Traditionally considered a risk-off area, the Utilities sector is the most weakly positioned. Just 10% of stocks in that group are in long-term technical uptrends.

What's Ahead

Here's what to watch in the week ahead: