Weekly Market Commentary February 19th to February 23rd 2024

The minutes of the January meeting of the Federal Open Market Committee took a hawkish tone and offered little surprise.  A number of officials noted concerns of the risks associated with cutting rates too quickly.  Notable cautionary remarks included the potential for the slowing pace of inflation to stall.  The observations now seem particularly prescient following an uptick in the latest Consumer Price Index and Producer Price Index readings.  For now, we can expect the 23-year high Fed Funds Rate of 5.5% to persist a bit further into the year than traders had been anticipating. 

Existing Home Sales kicked off in 2024 with a gain of 3.1% in January, ahead of the consensus forecast.  This is the highest level since February 2023.  A modest tick down in mortgage rates in November and December last year likely contributed to the gain but borrowing costs have subsequently risen again. 

As goes Nvidia, so goes the market.  The (now) third largest U.S. company reported another blow out quarter of revenue growth and sparked investors’ enthusiasm for the future of artificial intelligence and the semiconductor chips that will make it a reality.  The S&P 500 rallied along with the mega-cap chip maker and surpassed another all-time high, temporarily breaching the 5,100 milestone in intraday trading.  For the week, the S&P closed higher by 1.6% to 5,088.  The Nasdaq Composite was higher by 1.4%, to 15,996, temporarily breaching a new milestone of its own of 16,000.  The 10-Year U.S. Treasury yield closed the final trading session of the week at 4.25%, close to where it started and 43 basis points below the 2-Year. 

Key economic releases next week include Personal Consumption Expenditures, Consumer Confidence, Durable Goods Orders and New Home Sales.  A slew of Fed governors will be receiving airtime next week following the release of the FOMC minutes to put their own spin on the comments.