Stock market experiences fluctuation as new quarter begins

Stock market experiences fluctuation as new quarter begins

US stocks were mixed to kick off 2024’s second quarter on Monday as investors looked to softening in the Federal Reserve’s preferred inflation gauge as a sign of a coming interest rate cut this quarter.

The S&P 500 (^GSPC) fell 0.2% while the Dow Jones Industrial Average (^DJI) fell 0.4%. The tech-heavy Nasdaq Composite (^IXIC) rose slightly.

Wall Street has begun 2024 on a high note: The benchmark S&P 500 has set 22 fresh closing records so far this year as part of its best first quarter since 2019. Meanwhile, all three major averages have now risen for five straight months.

Markets were closed Friday, but the week’s data highlight — the Personal Consumption Expenditures price index — served to boost hopes of rate cuts this year. That index contains “core” PCE, the Fed’s preferred inflation gauge. The report showed core PCE rose 0.3% month over month, below economist expectations. Fed Chair Jerome Powell said Friday that the data was “along the lines” of what the Fed is looking for.

The data has given a boost to investor bets on a June rate cut. According to the CME FedWatch tool, around two-thirds of investors are pricing in a cut at the Fed’s June meeting, compared with about 55% last Thursday.

The highlight of Q2’s first week on the macroeconomic front is Friday’s jobs report, which will serve as another important signal to the Fed.

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  • Gold trades at new highs as investors bet on rate cuts

    Gold (GC=F) touched new highs on Monday following a series of records in March. The precious metal futures rose more than 1% to trade as high as $2,265 per ounce.

    Gold has been rallying on the expectation that Fed officials will lower interest rates this year.

    The Federal Reserve’s preferred inflation gauge released on Friday came in line with expectations. The print was interpreted by investors as another sign of a likely interest rate cut as early as June.

    Gold is up more than 6% year-to-date.

  • Stock market experiences fluctuation as new quarter begins

    Stocks mixed to kick off second quarter

    Stocks were mixed on Monday to kick off 2024’s second quarter and the start of a new month of trading.

    The S&P 500 (^GSPC) opened around the flatline while the Dow Jones Industrial Average (^DJI) dipped slightly. Investors were keeping a close eye on the blue-chip Dow Jones as it has been inching towards the 40,000 level in recent sessions. The tech-heavy Nasdaq Composite (^IXIC) rose 0.6%.

    Wall Street has begun 2024 on a high note: The benchmark S&P 500 has set 22 fresh closing records so far this year as part of its best first quarter since 2019.

    A softening read of the Federal Reserve’s preferred inflation gauge released on Friday was interpreted by investors as another sign of a likely interest rate cut as early as June.

  • Let the pre-earnings warnings on Apple begin

    With Apple’s (AAPL) stock down 11% year to date — the second worst Magnificent 7 performer behind Tesla’s TSLA 30% drop — Wall Street may be ready to sound the alarm on the next couple of earnings reports from the tech bellwether.

    First one out of the gate negatively ahead of Apple’s earnings in a few weeks is Loop Capital analyst Ananda Baruah.

    Baruah now projects Apple’s overall sales and profits to decline year over year in calendar 2024 for the first time since 2016.

    The reasons behind the call:

    • iPhone unit shipments are “simply too soft” due to weak “organic demand” and competitive forces.

    • Competition from Huawei and Xiaomi is “making a material impact.”

    • iPhone average selling prices are “flattening out”, says Baruah.

  • Here comes earnings season

    Believe it or not, another earnings season begins on April 12 with the big banks.

    One thing to start pondering is the divergence between what Wall Street is expecting and what companies are expecting, with the backdrop of markets at a record.

    A few fresh stats on this front from FactSet:

    Wall Street: Analysts have lowered their earnings estimates for the first quarter by a smaller margin than average. On a per share basis, estimates earnings for the first quarter have dropped by 2.5% since December 31. This decline is smaller than the five-year average drop of 3.7% and 10-year average decrease of 3.4%. Vibe: analysts are feeling more optimistic than the norm ahead of first quarter earnings season, likely due to the market’s robust advance.

    Companies: Approximately 112 companies from the S&P 500 have issued first quarter earnings guidance, with 79 issuing warnings and the rest upside versus estimates. The number of companies issuing negative EPS guidance is above both the five-year and 10-year averages, notes FactSet. Vibe: companies don’t share Wall Street’s enthusiam

  • Beware of the semiconductor stocks in April?

    A good chart on the semis from BTIG’s technical analyst Jonathan Krinsky below. It shows how quickly the Philadelphia Semiconductor Index (SOX) has advanced in a relatively short period (compared to prior five month periods).

    Can the gains continue? The semi bulls may have to contend with April seasonal vibes.

    Krinsky notes that the SOX has been negative eight of the last ten Aprils.

    The SOX has gone wild in recent months.The SOX has gone wild in recent months.

    The SOX has gone wild in recent months. (BTIG)

  • Why Alphabet’s stock is under-performing

    You maybe didn’t realize this given the meteoric moves in AI stocks and the hype around the technology, but Alphabet’s (GOOGL) stock isn’t really participating. Shares of Alphabet are up 8% year to date, lagging the Nasdaq Composite’s 9% gain and S&P 500’s 10.16% advance.

    Jefferies analyst Brent Thill is out with a few reasons this morning for why the stock is sucking wind.

    Out of all of them, I am most intrigued by the call out on management concerns. CEO Sundar Pichai has had a challenging 12-months on the AI front – from falling behind Microsoft (MSFT) on AI to not quieting concern on AI bias. Is he in the hot seat with investors? I wouldn’t go that far yet, but it warrants watching.

    Those Jefferies mentions:

    Jefferies

  • Inside the markets to kick off April

    April 8 is total solar eclipse day. You may also need a pair of sunglasses when looking at how markets and certain stocks will start in April.

    A little data analysis from yours truly (hat tip to Yahoo Finance’s Jared Blikre for the stats):

    • S&P 500 is the best-performing major US index year to date, up 10.16% (only major index to be up double-digits).

    • Four well-known ETFs are up double-digits year to date: energy (XLE), financials (XLF), industrials (XLI), communications services (XLC). Energy is the best-performer, tracking the renewed move higher in oil prices.

    • The main real estate ETF Real Estate Select Sector SPDR Fund (XLRE) is down 1.3% year to date, one of the worst performers despite the prospect of lower interest rates at some point this year.

    • Two of the Magnificent 7 (Tesla TSLA /Apple AAPL) are down double-digit percentages year to date.

    • Best Dow performer year to date: Disney (DIS). +35% and hovering at a record high ahead of this week’s showdown between Disney CEO Bob Iger and activist Nelson Peltz. More on that from Yahoo Finance’s Alexandra Canal here.

    • Worst Dow performer year to date: Boeing (BA), -25%. No surprise here.

    • Best-performing Nasdaq 100 stock not named Nvidia (NVDA): Constellation Energy (CEG) +58%. Interesting.

    • Worst-performing Nasdaq 100 stock not named Tesla: Sirius (SIRI) -29%, despite a major rebrand last fall designed to improve the narrative amongst investors.

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