Week 05 in Brief
How did the Major Indices Perform? On Friday:
- The S&P 500 lost 43.28 points, or 1.04%, to 4,136.48.
- The Dow Jones Industrial Average fell 127.93 points, or 0.38%, to 33,926.01.
- The Nasdaq Composite dropped 193.86 points, or 1.59%, to 12,006.96.
For the Week:
- The S&P 500 is up 65.92 points, or 1.6%.
- The Dow is down 52.07 points, or 0.15%.
- The Nasdaq is up 385.24 points, or 3.3%.
What Drove the U.S. Market?
- 2023’s stock market rally rolled on last week, helped by a downshift in Fed rate hikes, with the S&P 500 now up nearly 8% on the year. Interest rates took a bit of a round trip, falling through the week on expectations for less restrictive Fed policy but rising on Friday following a strong jobs report that showed that the economy added over 500,000 jobs last month. While other parts of the economy are showing signs of slowing, the healthy labor market has been doing great.
- Stocks and bonds have risen materially in recent months. On Wall Street, U.S. stocks rallied and closed higher, reversing declines in equity futures after data showed labor cost growth in the fourth quarter was the smallest in a year, at 1.0%, even in a tight labor market. Other data showed consumer confidence eased in January, as inflation expectations for the next 12 months climbed to 6.8% from 6.6% last month.
- The Federal Reserve is widely expected to raise interest rates by 25 basis points (bps) at the conclusion of its two-day policy meeting on Wednesday. Investors will closely monitor comments from Fed Chair Jerome Powell following the announcement for clues on the path of monetary policy.
How Did the European Markets Perform?
- European shares rose on Friday, boosted by gains in healthcare and energy firms, boosting optimism over the outlook for the region’s economy.
- The pan-European STOXX 600 reversed early losses and ended up 0.3% at its highest since April last year. The index notched gains for the second straight week.
- London’s blue-chip FTSE 100 briefly hit a new record high on Friday, marking a potential turning point for UK assets. The index closed up 1%.
- European equities rallied in the previous session on hopes that the global rate-hiking cycle was close to an end, even as the European Central Bank (ECB) stayed hawkish.
- Britain’s FTSE 100 index hit a record high of 7,906.58 points at 3.45 p.m. London time.
- The high was partly caused by the pound dropping against a strong dollar buoyed by better-than-expected U.S. jobs data.
- The blue-chip index surpassed its last record high of 7,903.50, which it hit on May 22, 2018.
- The Bank of England raised interest rates to their highest since 2008 Thursday, shortly followed by the European Central Bank meeting expectations and raising rates by 50 basis points.
How did Asian Markets Perform
- Chinese stock indexes performed worst in Asian markets on Friday as mixed economic data raised concerns over the timing of an economic recovery this year.
- China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes sank 1.7% and 1.4%, respectively. Both indexes saw steady profit-taking this week after recently hitting multi-month highs.
- Hong Kong’s Hang Seng index was the worst performer for the day, falling 1.8% on losses in technology stocks. Sentiment towards the tech sector was dented by mixed quarterly earnings from major U.S. firms released overnight.
- Indian stocks rose on Friday, with the Nifty 50 and BSE Sensex 30 indexes adding 0.2% and 0.6%, respectively. But a severe rout in the shares of Adani Enterprises Ltd and its related firms continued.
- Other Asian tech-heavy indexes also lagged, with the Taiwan Weighted index up 0.1%, while South Korea’s KOSPI added 0.5%.
Bonds and Commodities
- U.S. Treasury yields climbed after the payrolls report, with those on the benchmark 10-year note up 13 basis points to 3.528%, from 3.398% late on Thursday, poised for their biggest one-day jump since Oct. 19.
- Crude prices turned lower in part due to strength in the dollar and concerns about higher interest rates, with Brent and WTI both dropping nearly 8% on the week.
- U.S. crude settled down 3.28% at $73.39 per barrel and Brent settled at $79.94, down 2.71% on the day.
- Spot gold fell 2.3% to $1,869.49 per ounce at some point on Friday, its lowest in three weeks. US gold futures saw a larger drop at 2.6% to $1,880.30 per ounce.
- The greenback strengthened in the wake of the data, climbing off a nine-month on Thursday to hit 103.01, its highest since Jan. 12, as the dollar index rose 1.149% and the euro was down 1.02% to $1.0799.
- The dollar index, which tracks the currency against major peers, was down 0.22% to 101.57 on Friday.
- The Japanese yen weakened 1.90% to 131.18 per dollar, while the Sterling was last trading at $1.2053, down 1.39% on the day.
After an eventful week of corporate earnings, jobs numbers, and the latest FOMC meeting, next week’s lineup will be more subdued. Earnings season continues with reports from The Walt Disney Company, PepsiCo, Activision Blizzard, PayPal, Uber Technologies, and automakers Toyota and Honda, among others.
On Friday, we’ll get the preliminary February reading of the University of Michigan’s Consumer Sentiment Index (MCSI), gauging consumer confidence in the U.S.
Also on Friday, market watchers can expect fourth-quarter gross domestic product (GDP) figures from the U.K.