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WEEKLY ROUND-UP Thru Feb 9th 2024; “Market Power”

Hey Folks, thus far, the momentum from last November is still in charge, and to be more specific, AI themed stocks are in charge. The big question is how long will this last before we see a pullback in price action. Get my take in this week’s round-up.


US indexes ended the week higher with the S&P 500 reaching new highs and breaching the 5,000 threshold for the first time. The advance remained relatively narrow, however, with an equally weighted version of the index significantly trailing the standard market-weighted version for the fourth time in five weeks. The market picked up momentum on Wednesday morning, seemingly helped by the solid reception given to the U.S. Treasury Department’s record $42 billion auction of 10-year notes. The auction calmed fears that the government’s record borrowing levels would push borrowing costs higher, thereby removing some of the Federal Reserve’s power to cut interest rates if needed to stimulate the economy in the coming months.

The week’s sole economic surprises arguably came on Monday morning in the form of S&P Global’s reading of services sector activity, which jumped unexpectedly to a four-month high and back solidly in expansion territory (from 50.5 in December to 53.4 in January, with readings greater than 50 indicating expansion). The Institute for Supply Management’s rival gauge also indicated solid growth (55.8), but its measure of prices paid for services soared to its highest level in nearly a year.
Treasury yields increased at the start of the week, spurred higher by the strong jobs report seen the prior week as Fed Chair “Boom Boom” Powell’s comments in a “60 Minutes” TV interview reiterated that he saw no need to cut rates immediately.

In Europe, European Central Bank (ECB) officials continued to warn against cutting interest rates too early. Many analysts believe the ECB is unlikely to lower borrowing costs before June. Meanwhile, in the UK economy appeared to be more resilient at the turn of the year, which could reinforce the Bank of England’s (BoE) reluctance to ease policy quickly as the unemployment rate at 3.9% while the PMI for services came in at 54.30 in January.

IN Japan, economic data developments continued to suggest that the BoJ’s achievement of its 2% inflation target, driven by prices rising in tandem with wage growth, was not yet in sight. The International Monetary Fund (IMF) provided its latest opinion on the BoJ’s conduct of its monetary policy, following a policy consultation with Japan that it undertakes once a year. They indicated that because upside risks to Japan’s levels of inflation have materialized in the past year, the BoJ’s focus should shift to winding down unconventional monetary policy while maintaining financial stability.

And in China, stocks rallied in a holiday-shortened week as the government’s latest raft of stimulus measures offset concerns about deepening deflation. The private Caixin/S&P Global survey of services activity fell to a weaker-than-expected 52.7 in January from December’s 52.9 as new orders fell, although the gauge stayed in expansionary territory for the 13th straight month. The People’s Bank of China said in its latest quarterly policy report that it would keep policy support flexible and precise to boost domestic demand. The central bank also forecast that consumer prices would “rebound modestly.” Many economists predict that Beijing will introduce further stimulus measures as the world’s second-largest economy grapples with a property market downturn, weak consumer demand, and deflationary pressures.

Enjoy this Week’s Round-Up

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