Your Best Path Market Recap vol. 3.7 February 12-16

Market Recap

WEEK OF FEB. 12 THROUGH FEB. 16, 2024

The S&P 500 index slipped 0.4% this week, ending a winning streak that had lasted for most of 2024, amid mixed economic data and quarterly results.

Friday's session ended at 5,005.57, down from the previous week's closing level of 5,026.61, which had been a record at the time. The index set new record closes on Monday and Thursday, but a 0.5% loss on Friday took it below the week-earlier close.

The only other weekly loss in 2024 was the first week of the year. The index is still up 4.9% (not including dividends) for the year to date.

Investors parsed through a mixed round of economic data, including the US seasonally adjusted consumer price index and the US producer price index, both for January, each of which rose more than expected. Retail sales for January also raised concerns, and results fell more than expected. Industrial production also missed expectations.

Still, home-builder confidence grew more than expected this month, and weekly unemployment claims were lower than expected. US consumer sentiment is up so far in February as people felt more assured about the economy, preliminary data from the University of Michigan's Surveys of Consumers released Friday showed.

Though quarterly earnings continued to come in mostly better than expected, overall sales slightly missed views.

Given this inflation data, I expect the Fed to continue to hold interest rates where they are at their next meeting. We should remember that housing data takes the longest to reflect economic changes; some landlords still have not had a chance to raise rents to keep up with inflation. So the inflationary cycle - which has run its course in most sectors - is still playing out in real estate. I do expect a stronger housing market in the Spring as mortgage rates have come off their highs, consumer confidence grows, and unemployment stays low.

Some 72% of the S&P 500's components that reported quarterly results in the last week posted earnings above analysts' expectations. The week's overall S&P 500 earnings came in about 6.9% above forecasts, according to Bloomberg data. While 55% of companies reported better-than-expected sales, revenue from S&P 500 companies were 1.9% below expectations.

The technology sector had the largest percentage drop of the week, down 2.5%, followed by communication services, which shed 1.6%. Also in the red, consumer discretionary slipped 0.8%, and real estate edged down 0.2%.

The technology sector's decliners included shares of Akamai Technologies (AKAM), which fell 15%. While Akamai's Q4 adjusted earnings per share surpassed the Street view, its revenue for the quarter slightly missed expectations, and the company gave guidance ranges for Q1 that had low ends below Street consensus estimates.

In communication services, shares of Paramount Global (PARA) declined 7% as media reports said the company is cutting hundreds of jobs across the globe.

On the upside, the materials sector's shares had the largest percentage increase this week, up 2.4%, followed by a 2.2% rise in energy. Other gainers included financials, utilities, health care, industrials, and consumer staples.

Among the materials sector's top gainers, shares of Ecolab (ECL) rose 6.2% as the company reported Q4 adjusted earnings per share slightly ahead of the Street view and forecast Q1 adjusted EPS above analysts' consensus view at the time.

The energy sector's advance was led by shares of Diamondback Energy (FANG), which jumped 18% as the company and Endeavor Energy Resources said they have entered into a $26 billion merger agreement to create a large energy firm focused on the Permian Basin in Texas. Once the deal closes, Diamondback Energy shareholders are expected to retain nearly 61% of the merged entity, while Endeavor Energy Resources' owners will hold the rest.

US stock markets will be closed on Monday for Presidents' Day. Earnings reports expected next week include Walmart (WMT), Home Depot (HD), NVIDIA (NVDA) and Intuit (INTU).

Economic data will be on the lighter side this week. Reports will include January's US leading economic indicators on Tuesday and January existing home sales on Thursday. The minutes of the Federal Open Market Committee's January policy meeting are scheduled for Wednesday.