Market Perspective for January 21, 2024

The third week in January was another truncated one as markets were closed Monday for the Martin Luther King Day holiday, there was still a significant amount of interesting news. The first major piece of news to be released in the United States was on Wednesday when retail figures were made available.

Over the past month, retail sales were up .6 percent while core retail sales were up .4 percent over that same period. Analysts had expected increases of .2 percent and .4 percent respectively. It’s possible that the higher figures were reflective of the holiday season during when consumers tend to be enthusiastically spending. It may also be a sign that the economy is still too hot to handle a rate cut soon.

On Thursday, unemployment claim figures for the past seven days were made available, and it was revealed that 187,000 people had filed for benefits during that period. This was compared to 203,000 a week ago and an expected 206,000 for the current period.

On Friday, preliminary consumer sentiment and inflation expectation data were released by the University of Michigan. The reports found that consumer sentiment was 78.8 percent, which was significantly higher than the projected 69.8 percent and much higher than last month’s reading of 69.7 percent. Inflation was expected to be at 2.9 percent a year from now compared to an expectation of 3.1 percent during last month’s reading.

The S&P 500 finished the week up .89 percent to close at 4.839. On Wednesday, the market reached its low of the week at 4,717 while it closed at the high of the week on Friday. The index is currently at an all-time high and some analysts believe it has the potential to eclipse 5,000 at some point this year.

The Dow was relatively flat this week finishing up .13 percent over the past four trading days. On Wednesday, the market hit a low of 37,141 before rebounding and closing at the high of the week at 37,863. In fact, the Dow spent most of the week in the red before surging 345 points on Friday to eke out a modest gain.

Finally, the Nasdaq was up 1.98 percent this week to close at 15,310 and is now just 215 points away from its all-time high. On Wednesday, the market hit its low of 14,722 and would continue to rally through the end of the day on Friday.

Oil would continue to remain range bound making a low of $70.72 on Wednesday and a high of $74.70 on Friday. During the week, an American oil tanker was attacked in the Red Sea near Yemen, which likely spooked markets during the middle of the week. Any prolonged conflict involving American oil interests may help the market break out of its recent trading range.

Gold made a high near $2,060 an ounce on Monday before falling back to $2,005 an ounce on Wednesday. The market would rebound to close the week at $2,030 an ounce.

In international news, it was revealed on Tuesday that inflation in Canada increased to 3.6 percent on an annualized basis from 3.3 percent a month ago. China revealed that retail sales were up 7.4 percent on an annual basis while gross domestic product was up 5.2 percent on an annualized basis over the past quarter. In Great Britain, inflation was up to 4 percent from 3.9 percent a month ago while retail sales fell 3.2 percent compared to last month. Finally, in Australia, the unemployment rate remained at 3.9 percent from November to December.

A number of important reports will be released this week. On Wednesday, the Flash Services PMI and Flash Manufacturing PMI figures will be made public. On Thursday, advance GDP data for the last quarter will be made available while the Core PCE Price Index will be released on Friday.

A slew of monetary policy decisions will be forthcoming from central banks around the globe including Japan and most of the major economies in the European Union (EU). The Bank of Canada (BOC) will also release its latest rate decision, and when taken as a whole, what other banks do might provide some insight into what the Fed has planned in March.

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