Weekly Market Update, Week of January 2, 2024

Market Update—Week of January 2, 2024
Presented by Axial Financial Group

Quick Hits

1. Report releases: There were no major data releases during the holiday-shortened week.
   2. Financial market data: International stocks led the way as China continued to try to stimulate its economy.
   3. Looking ahead: We expect several important releases this week, including the December jobs report.

Keep reading for an in-depth look.

Report Releases—December 26–29, 2023

With the Christmas holiday on Monday and an early close for the bond market on Friday, there were no major economic updates last week. Several important announcements are expected this week, however; see the Looking Ahead section.

Financial Market Data

Equity

Source: Bloomberg, as of December 29, 2023

The S&P 500 and Nasdaq Composite moved higher for the ninth consecutive week. International markets led the way on the potential for continued stimulus from the Chinese government by lowering the required reserve ratio for banks. Over the past nine weeks, small-caps rose more than 24 percent; the S&P 500 increased 16 percent and the Nasdaq grew more than 18 percent over the same timeframe.

Fixed Income

Source: Bloomberg, as of December 29, 2023

Movement in fixed income markets were muted, with fewer than four days of trading during the holiday-shortened week. The front end of the yield curve moved lower as investors added a bit to short-term Treasuries as 2024 approached. The Bloomberg US Aggregate Bond and US Treasury indices increased 8.2 percent and 6.59 percent, respectively, in the last nine weeks of 2023.

The Takeaway

• A broadened rally ended the year as small-caps and the rest of S&P 500 played catch-up to top Nasdaq names.
• The front end of the Treasury yield curve moved lower as fixed income investors were a bit more cautious.

Looking Ahead

Reports on business confidence, Federal Reserve (Fed) policy, and employment are expected in the week ahead.

• The week kicks off Wednesday with the release of the ISM Manufacturing index for December. Manufacturer confidence is expected to improve modestly, but the index is expected to remain in contractionary territory.
• We also expect the release of Federal Open Market Committee (FOMC) meeting minutes for December on Wednesday. The Fed kept interest rates unchanged at the meeting but hinted that cuts in 2024 may be appropriate if we continue to make progress in combating inflation.
• On Friday, the week wraps with the December employment report and ISM Services index for December. Economists expect to see continued hiring growth to end the year, with calls for 170,000 new jobs during the month. Service sector confidence is set to decline slightly after improving more than expected in November.

Authored by the Investment Research team at Commonwealth Financial Network^®.

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Disclosures: Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor’s. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Russell 2000^® Index measures the performance of the 2,000 smallest companies in the Russell 3000^® Index. The Bloomberg US Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The U.S. Treasury Index is based on the auctions of U.S. Treasury bills, or on the U.S. Treasury’s daily yield curve. The Bloomberg US Mortgage Backed Securities (MBS) Index is an unmanaged market value-weighted index of 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC), and balloon mortgages with fixed-rate coupons. The Bloomberg US Municipal Index includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than 2 years) selected from issues larger than $50 million. Basis points (bps) is a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 1/100th of 1 percent, or 0.01 percent.