S&P 500, Dow Jones again hit record highs; Technology stocks receiving attention again | chart watcher

What a week! Large-cap technology stocks, the Federal Reserve meeting and January non-farm payrolls dominated the headlines this week, making for an exciting week for investors. Friday’s stock market price action was unexpected, but the end of the week’s trading was optimistic.

Recruitment, Recruitment, Recruitment

The January jobs report came in much better than expected, and one might think it would lead to a sell-off after Fed Chairman Powell’s comments. On Wednesday. However, investor optimism prevailed and stock market indices closed higher, with the S&P 500 ($SPX), Dow Jones Industrial Average ($INDU) and Nasdaq 100 ($NDX) hitting record highs. This is starting to sound like a broken record, as if the stock market is waiting for the Nasdaq Composite to catch up and hit a new record high.

The U.S. economy added 353,000 jobs, well above estimates of 185,000, according to the Bureau of Labor Statistics’ Explosive Jobs report. The unemployment rate was 3.7%, slightly lower than the forecast of 3.8%. The wage growth rate also rose.

So the combination of more jobs and higher wages would make a March rate cut even remotely likely. May is still far away and a lot of data will be available before then. But it would be surprising if anything moves the needle enough to warrant a rate cut in March.

A strong labor market is good for the economy. The question is whether this is consistent with the labor market rebalancing the FOMC wants to see. Considering that weekly working hours have been reduced to 34.1 hours, there is a possibility that a rebalancing of job supply and demand may occur. If these numbers continue to fall and companies start cutting jobs, it will mean a realignment. Another data point to focus on is the number of people who are working or able to work. If this number also decreases, it would further confirm that supply and demand forces in the labor market are becoming more balanced. But we won’t know that for some time, and investors seem to have shifted their focus to the present.

Technology stocks in the spotlight again

The stock market didn’t seem worried about the stellar jobs report, and Powell’s comments are now in the rearview mirror. Broad market indices closed higher as large technology stocks took center stage. income alphabet (google), microsoft (MSFT), Amazon (AMZN), apologize (AAPL) and meta platform (META) was mixed, but that didn’t stop the tech stock from being the star in the final part of the trading week. AI is still the buzzword that fuels this market.

Consumer demand is reflected in Amazon’s results on Thursday. And META, which reported strong fourth-quarter results and positive first-quarter results, surged after Thursday’s close. But that wasn’t everything. META will issue its first quarterly dividend of $0.50 per share. The news sent stock prices higher, with META closing at $474.99 per share, up 20.32%, hitting an all-time high. This adds $197 billion to its market capitalization.

Chart 1. Metastocks with Soaring Earnings and Dividends. Meta hit an all-time high on strong earnings, guidance, and shareholder dividend news.Chart source: StockCharts.com. For educational purposes.

One area of ​​the market that struggles to keep up with the broader index is small-cap stocks. Small-cap stocks tend to perform better in a low interest rate environment, and since rate cuts are not currently on the Fed’s radar, the S&P 600 Small Cap Index ($SML) has been one of the few losers in U.S. markets. Market Overview This is a panel of the StockCharts dashboard.

Speaking of interest rates, the US 10-year Treasury yield chart provides a good picture (see below). The 10-year yield plummeted to a record low of 3.817% and then exceeded 4% again.

Chart 2. 10-year Treasury yield soars. The strong January jobs report sent the benchmark 10-year U.S. Treasury yield index surging. Despite the big gains, yields closed lower for the week.Chart source: StockCharts.com. For educational purposes.

Today’s yield fluctuations did not help bond prices. The iShares 20+ Year Treasury Bond ETF (TLT) fell 2.21%.

conclusion

Overall, 2024 is off to a positive start, which is good for stocks. It will be interesting to hear some takeaways from the Fed’s speech next week. After this week’s performance, the market may not be affected by the delayed rate cut. This stock market keeps moving. If you can’t stop an interest rate cut by delaying it, what will you do?

Next week is another week. If you are considering adding positions to your portfolio, take advantage of downturns while the market is trending higher. Only when there is a drastic change in events should we think differently.

weekend wrap up

• The S&P 500 closed at 4,958.61, up 1.07%, and the Dow Jones Industrial Average closed at 38,654.42, up 0.35%. The Nasdaq Composite Index rose 1.74% to 15,628.95.
• $VIX was down 0.22% at 13.85.
• Best performing sector this week: Consumer Discretionary
• Worst performing sector this week: Energy
• Top 5 Large Cap Stocks SCTR Stocks: Super Micro Computer, Inc. (SMCI); Affirm Holdings (AFRM); CrowdStrike Holdings (CRWD); Veritiv Holdings, LLC (VRT); Nutanix (NTNX)

On the radar next week

• Earnings week continues with reports from Walt Disney Co. (DIS), Gilead Sciences (GILD), Alibaba Group Holding (BABA), Eli Lilly (LLY), and Snap Inc. (SNAP).
• January PMI and ISM
• Federal Reserve Speech
• November S&P/Case-Shiller Home Prices
• Fed interest rate decision

disclaimer: This blog is for educational purposes only and should not be construed as financial advice. You should not use any of our ideas and strategies without first evaluating your personal and financial situation or consulting a financial professional.