Date published - 2024-01-09
(This is a very shortened version highlighting excerpts of our full report which is available for our paid subscribers).
In the first trading week of the year, shortened by holidays, investors interpreted the latest economic data and the possible direction of US monetary policy as key drivers. After a strong close to 2023, markets started 2024 on the back foot and this pause in momentum ended a 9-week winning streak for the major indexes, with the Nasdaq 100 recording losses for six consecutive days. By the week's end, the S&P 500 and Nasdaq Composite were down by 1.8% and 3.8%, respectively, while the Dow Jones Industrial Average saw a lesser decline of 0.7%. Defensive sectors like healthcare and utilities were the few gainers in an otherwise weak market, and energy stocks benefited from rising commodity prices.
In individual stock news, Apple fell 6% over the week, a significant drop of over $100 billion in its market capitalization. This decline was part of a broader weakness in the tech-heavy Nasdaq Composite, influenced by multiple broker downgrades and concerns over slowing iPhone sales. We also look at developments with global shipping giant, Maersk. Brent crossed $78.5 per barrel amidst escalating tensions in the Middle East and anticipation of the US Secretary of State's visit to the region. Gold prices rebounded to about $2,050 an ounce, aided by a weaker dollar and lower Treasury yields. The yield on US 10-year treasuries rose back above 4% in tandem with the weaker dollar. Concerns over the US debt and fiscal backdrop were key drivers along with concerns that rate cut expectations were too aggressive in the latter part of 2023.
Some SA company highlights last week:
South African markets had a rough start to the year, with resource stocks, particularly gold and platinum, under significant pressure. It's still relatively early in the year with many traders and fund managers only returning to their desks this week so the company news was notably light.
Goldfields dropped 13.6%, Amplats decreased by 9%, while Multichoice saw a 4.9% rise last week. We look at some of the drivers in what was a light news flow week.
Economic:
The economic calendar kicked off the year with a slew of Purchasing Manager Index (PMI) releases which highlighted the divergence between China and Western economies. Germany will remain an economy in focus as economic weakness and fiscal concerns come to the fore. However, the main focus last week was on US economic data. We saw the release of both the ADP (private sector) jobs data as well as the official nonfarm payrolls release from the US Department of Labor - both indicating a robust labor backdrop although total job gains for 2023 were the smallest annual increase since 2019, barring the pandemic year of 2020. We unpack the numbers in more detail in the full report.
For the week ahead:
This week will be the first full trading week of 2024 with most market participants back at their desks and the economic calendar is filling up.
SA: Manufacturing production, foreign exchange reserves.
US: inflation data for December, Trade.
Europe: German industrial production, Eurozone inflation, UK GDP and manufacturing production.
China: Total Social Financing, money supply, trade and inflation.
Our Market's and Risk view:
Our risk indicators eased marginally from 'Extreme Greed' to 'Greed' mainly driven by a 2-3 percentage point uptick in the VIX index (equity volatility) while bond volatility has remained contained. Our full report includes more detail. Our cautious stance since late last year has been vindicated and we continue to advocate for a cautious stance, to take profit and set tight stop losses in the event of any signs of a deeper correction on shorter term charts and indicators.
(Clients can contact us for more detail on our overall risk matrix).
Our full report unpacks all of this in more detail as well as their implications for the markets.
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