January 2024 Stock Market Outlook

“The Maradona Theory of Interest Rates is alive and kicking,” BofA economist Claudio Irigoyen wrote. “Let the market do de facto easing but keep the optionality open. That explains why the Fed might find optimal reasons not to push back strongly.” A short-term indicator can indicate a market breather on the horizon, according to Wolfe Research. Shares of Boeing climbed more than 5% following quarterly results that beat analyst estimates on the top and bottom line.

  1. While home prices will likely remain elevated—and even increase in some markets—industry experts expect prices in certain areas of the country to soften.
  2. That, combined with New York Community Bancorp’s quarterly report—which included a quarterly loss and a dividend cut—pushed yields lower.
  3. The S&P 500 registered a 26.89% gain in 2021 and is down 7.7% so far in 2022.
  4. In London, the FTSE 100 dropped 3.8% in one day, while the French CAC also fell 3.8%, the DAX was 4% lower in Germany, and the pan-European EUROSTOXX 50 fell 5.08%.
  5. China’s factory activity contracted for a fourth consecutive month in January, though the official manufacturing purchasing managers’ index expectedly rebounded to 49.2 from 49 in December, a six-month low.
  6. That streak is coming to a spectacular end thanks to the hotter than hoped for consumer price index report, as investors worry that the Federal Reserve is going to raise rates even more aggressively next week to fight persistent inflationary trends.

Alphabet, Meta and Microsoft all set new records, with Microsoft’s worth now exceeding $3 trillion. Interest rates, sitting around 5.5%, have risen substantially from the near-zero rates of the pandemic. And some tech companies are reshuffling staff to prioritize new investments in generative AI. But experts say those factors do not sufficiently explain this month’s layoff frenzy.

When will the stock market recover?

Historically, the price of gold tends to fall when the dollar’s value increases relative to other currencies. This was one of the reasons why the gold price slipped to a more than two-month low at the end of April. In March, gold climbed further to $2,043 per ounce, close to its all-time high, showing a rise of 13.5% from the start of the year. Days before Russia’s invasion of Ukraine, the spot gold price hit $1,912 per ounce, rising from its $1,800 range of the beginning of February. Russia’s invasion has caused a supply shock that has helped drive up oil prices, while also sparking concerns about Europe’s economy.

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Even though the hotter-than-hoped-for inflation report is sparking fears of more big rate hikes from the Federal Reserve, some optimists are starting to see light at the end of the Fed tightening tunnel. If that’s true, inflation pressures could finally start to subside more dramatically. Investors may be hoping that’s the case, which is one reason forex moving average to justify the big stock market surge Thursday. Investors focused more on strong earnings from the likes of Delta (DAL), Dow component Walgreens (WBA) and Wall Street giant BlackRock (BLK). All 30 Dow stocks finished in green and nearly all of the S&P 500 members closed higher, led by strong gains from materials, energy and financial stocks.

Global X Uranium ETF

Treasury yields finished lower Monday after the release of the Treasury’s quarterly borrowing estimate, as investors await a Fed policy decision and a December jobs report later this week. Alphabet — Shares fell around 5.5% on the company’s fourth-quarter results. Google ad revenue came in at $65.52 billion, short https://bigbostrade.com/ of analysts’ expectations for $65.94 billion, per StreetAccount. “When the Fed changes communication, it’s really slow. It’s like turning a battleship. They do it very, very slowly. And what they need to start pivoting towards is sort of confirming the expectation of rate cuts more and more,” Tilley said.

“Markets are walking a fine line between expecting lower interest rates and higher corporate earnings,” DataTrek co-founder Nicholas Colas said in a recent note to clients. The frenzy kicks off on Tuesday with the earnings results from mega-cap tech companies Microsoft and Alphabet. Investors will be keenly focused on commentary related to artificial intelligence, of which both companies are at the forefront of, and how it will impact their business in 2024 and beyond. The S&P 500 is coming off two weeks that saw record highs in the benchmark index, buoyed by earnings optimism and data showing that the US economy is growing at a healthy clip even as inflation continues to show signs of cooling.

Boeing — The aircraft maker jumped more than 5% after its losses from the end of last year came in lower than expected. Boeing reported an adjusted loss per share of 47 cents on revenue of $22.02 billion. Analysts had expected losses of 78 cents per share on $21.1 billion in revenue, according to LSEG, formerly known as Refinitiv.

Fruits and vegetables rose 1.6% for the month, while cereals and bakery products rose 0.9%. Other groceries increased 0.5% in September, following a 1.1% increase in August. Stocks roared back in late morning trading after plunging at the opening bell.

Employment cost index rose less than expected in Q4

The market has grown increasingly nervous that the Fed will raise rates faster and higher than expected to get inflation under control. The forecast is for a year-over-year increase of 8.8% for overall producer prices and 7.1% over the past 12 months for core PPI, which excludes food and energy costs. Moreover, the ongoing war in Ukraine has lowered investors’ risk appetite, leading to many people selling riskier investments and turning to safe-haven assets like gold and precious metals. Unfortunately, the situation is unlikely to change until there’s enough economic data to prove that inflation has slowed down. Last week, the S&P 500 fell into a bear market, dropping more than 20% from its record high. The war in Ukraine has brought new uncertainty to a stock market that already had a rocky start this year.

When such a decline, after a big gain in the previous year, has happened in the first half of the new year, and it has on 12 occasions, the market has gotten back to break even 100% of the times. Stovall said one other factor to consider is that markets tend to do a lot of digesting after a year when returns have been 20% or greater. The S&P 500 registered a 26.89% gain in 2021 and is down 7.7% so far in 2022.

About 27% of Americans told Gallup in a recent poll that they view the economy as good or excellent, up from 22% in December. It doesn’t mean stocks will continue to rise indefinitely, but it does reflect a generally optimistic outlook on Wall Street. The most recent readings have been promising, as the Personal Consumption Expenditures (PCE)—the Federal Reserve’s preferred inflation gauge—showed inflation falling to 3% year-over-year in November. Last month’s CPI also looked better, with inflation dropping to 3.2% from 3.7%.

The S&P 500 index closed at a record on Friday, crossing above its old high-water mark, set in early 2022. The gains show that investors have overcome fears of rising interest rates and panic about a recession that had governed stock trading for much of the past two years. Market watchers will have their focus trained on Wednesday this week, when the FOMC ends its two-day meeting with a decision on the federal funds interest rate that currently stands at 5.25% to 5.5%. Investors strongly believe that the Fed will keep rates there, with the CME FedWatch tool indicating a 98.4% chance that markets have priced in another pause at the current rate, with another 1.6% chance of a 25-basis-point hike. The Dow plummeted nearly 900 points in late morning trading…and all 30 Dow components were in the red.

Mortgage rates have more than doubled in the past year as the Federal Reserve pushed ahead with its unprecedented campaign of hiking interest rates in order to tame soaring inflation. The combination of the central bank’s rate hikes, investor’s concerns about a recession and mixed economic news has made mortgage rates volatile over the past several months. The Fed may want to “douse hopes of any early easing in policy,” noted David Kelly, chief global strategist at J.P. “This is, in part, because they are genuinely uncertain about how sticky inflation might be in an economy experiencing above trend economic growth and a still very tight labor market. The gold price started 2022 at around US$1,800 per ounce, and just before Russia invaded Ukraine on February 24 of that year, gold was trading at US$1,864.

Stock in peer tech firms Microsoft and AMD slipped nearly 3% each on lower-than-expected forward guidance after posting quarterly results. Traders were closely watching the Fed announcement for signs of when the central bank would begin to cut rates. Powell seemingly threw cold water on the markets expectation for a March cut, noting further encouraging data on inflation was needed. The Fed decided to keep the monetary policy unchanged at 5.25%- 5.50% on Wednesday. He said the next several months will undoubtedly be important for the economy and the housing market. It just goes to show that even in a bear market and with recession fears swirling due to concerns about uber-aggressive rate hikes from the Fed to try and stomp out inflation, investors still need to focus on fundamentals.