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WEEKLY ROUND-UP Thru Feb 2nd 2024; “Big Tech Keeps on Rolling”

Hey folks, after getting a number of mega cap tech earnings this past week it was enough to propel the markets higher. However the breadth underneath the markets is fairly weak and this will need to improve or we are setting ourselves up for some consolidation and downward price action. Get my take on this markets in this week’s round-up.

Weekly Sound Bites:

US indexes ended the week mixed amid a slew of significant earnings reports and economic data. The S&P 500 and the Dow moved to intraday highs, but the small-cap indexes recorded losses. A very busy week of Q4 Earnings saw the tech giants driving movements in the major benchmarks. It started with a lower-than-anticipated earnings guidance from Microsoft, Google parent Alphabet, and chipmaker Advanced Micro Devices then quickly reversed following upside earnings surprises from Amazon and Facebook. Apple sold off a bit.

The week’s scheduled Federal Reserve policy meeting, concluding Wednesday, also seemed to sway sentiment. Policymakers left short-term interest rates unchanged, as was widely anticipated, but at his post-meeting press conference, Fed Chair “Boom Boom” Powell stated that he didn’t think it’s likely that the Fed will cut rates in March. And by the end of the week, futures markets were pricing in only a 20.5% chance of a rate cut at their March meeting, down from 47.7% the week before. Chances of a rate cut seemed to diminish further on Friday, after the Labor Department reported that employers had added 353,000 nonfarm jobs in January, nearly double consensus estimates, while November’s and December’s gains were also revised higher. However, nearly all jobs added were part-time workers. And the average workweek fell to 34.1 hours which is in recession territory. Average hourly earnings also surprised on the upside and rose 0.6%, bringing the year-over-year increase to 4.6%. The unemployment rate remained steady at 3.7%. The yield on the benchmark 10-year U.S. Treasury note rose in the wake of Friday’s jobs report but still ended lower for the week.

The eurozone economy unexpectedly avoided a recession in the final quarter of 2023. Gross domestic product (GDP) during the period was unchanged compared with the previous three months and 0.1% higher than a year earlier. The Bank of England (BoE) held its key interest rate steady at an almost 16-year high of 5.25% but appeared to signal that it would consider lowering it for the first time since consumer price inflation accelerated after the coronavirus pandemic.

Over in Japan, the BoJ’s January monetary policy meeting reflected growing confidence among policy board members that the achievement of the price stability target has started to come in sight. Many believe the BoJ is likely to reach a point where it can normalize monetary policy. Nevertheless, even if the policy of negative interest rates is terminated, it is highly likely that accommodative financial conditions will be maintained.

Stocks in China retreated as continued downbeat economic data and property sector headlines fueled investors’ pessimism about the growth outlook. The official manufacturing purchasing managers’ index (PMI) rose to 49.2 in January from 49.0 in December amid improved production growth, but still lagged the 50-mark threshold separating growth from contraction. The value of new home sales by the country’s top 100 developers fell 34.2% in January from the prior-year period, roughly even with the 34.6% drop in December while the liquidation of Evergrande could undermine China’s financial system and further we3aken confidence in the real estate market.

Enjoy this week’s Market Round-Up:

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