Date published - 2024-01-30
(This is a very shortened version highlighting excerpts of our full report which is available for our paid subscribers).
Last week, the US stock market ended higher, continuing with its bullish momentum. The S&P 500 closed at another all-time high of 4,839, adding just over 1%, while the NASDAQ lagged gaining just under 1%. The Dow Jones ended the week 0.7% higher. Notable movers included Intel (-9%), Netflix (+17%), Tesla (-13.7%), Boeing (-3.6%) and 3M (-11.5%). We unpack the drivers in our full note.
Brent crude experienced significant gains closing above $83 per barrel on Friday. This marked the second consecutive week of increases and the highest price point in nearly two months. Gold prices hovered around $2,020 an ounce on Friday, with investors closely monitoring U.S. economic data to assess the Federal Reserve's potential interest rate trajectory.
Feature Slide - S&P vs NASDAQ
This week, we include a chart of the relative ratio between the S&P 500 and the NASDAQ. The NASDAQ features many tech heaveyweights and while the S&P has been propelled primarily by tech stocks the relative trade is important for traders looking for a more market neutral approach.
Some SA company highlights last week: (details in full report)
South African stocks enjoyed a strong week to claw back some year-to-date losses with Resources and Industrials putting in a strong performance at a sector level. Retail stocks also provided several updates. Our full report includes details but some highlights below.
Harmony: Harmony Gold reported strong results. HAR shares surged by +13% for the week.
Sasol: Sasol faced challenges in its chemicals segment. SOL shares declined by -1.1% for the week.
Dis-Chem: DCP shares increased by +6.2% for the week as the company entered some related party transactions.
Mr Price: Mr Price's trading update for the 13 weeks ended December 30. MRP shares increased by +9.9% for the week.
The Foschini Group: TFG rallied +11.8% for the week on an update.
Economic:
Domestically, the focus was on inflation data and the SARB. South Africa’s inflation rate for December 2023 dipped to 5.1%, down from November's 5.5%. Our full report looks at the underlying drivers and risks. The SARB MPC opted to maintain the repo rate at 8.25% in line with expectations. Inflation and growth forecasts were updated. The decision to keep rates on hold was unanimous for a second consecutive meeting.
US GDP expanded at an annualized rate of 3.3%. The personal consumption expenditure (PCE) price index (The Fed’s preferred inflation metric) increased by 0.2% month-over-month in December 2023, marking the first increase in PCE prices in three months. The annual rate remained steady at 2.6%. The FOMC this week is key to watch.
In Europe, the ECB kept rates unchanged at 4.5% but maintained a hawkish stance. We also saw the release of flash PMI data from a number of countries. In aggregate, PMI data was more upbeat in January from depressed levels in December with confirmation of the numbers this week.
For the week ahead:
SA: Money supply and credit, PMI, vehicle sales. Budget is the next big event risk in about a month.
US: US NFP and jobs data, FED FOMC (main focus).
Europe: Eurozone GDP, BOE Meeting.
Global: IMF WEO, OPEC meeting, Geopolitical developments
Our Market's and Risk view:
Our risk indicators have dialled back up to 'Extreme Greed' territory. The VIX index has recently ticked higher and is starting to reflect some of our concern. Bond volatility continued to ease but will be watched closely this week with the Fed meeting and US Tresaury yields. Put/Call ratios remain low and the recent market momentum has propelled our overal risk assessment higher.
The rally is a double edged sword as we remain cautiously long as signs of a correction are yet to emerge and be confirmed. The irony is that the correction, when it does emerge, may be swift so vigilance and tight stops are appropriate as we may not get an opportunity to write about it in time. Risk needs to be managed actively at current levels.
(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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