Market Commentary

Markets Push Ahead Despite Data

by Sequoia Financial Group

March 4, 2024

Equity markets started the week mostly lower, ending on Monday near their worst levels. Small caps outperformed, with the Russell 2000 higher by 0.61%. GOOGL was a notable decliner as the stock was pressured on news of its Gemini chatbot showcasing inaccuracies in its AI-generated images.¹ Berkshire reported Q4 earnings and held its annual shareholders meeting over the weekend. Its shares were pressured after reporting a record $167.6B in cash as Buffett commented on the lack of meaningful deals in the current market.²

Markets were choppy on Tuesday but ended the day mostly higher. Small caps continued to outperform the other major equity indices, rising 1.34% for the day. Durable goods orders fell sharply, with headline numbers declining 6.1% m/m, sharply lower than estimates of a 4.1% decline.³ Also surprising on the downside, durables ex-transportation declined 0.3% m/m, lower than estimates of a 0.4% increase.³ Headline numbers were likely affected by weak Boeing orders. February consumer confidence came in at 106.7, well below consensus of 114.8.⁴ Participant comments noted uncertainty around the labor market situation and US politics beginning to eclipse inflation concerns.⁴ AAPL shares reversed higher on news the company will abandon its plans for an electric car and focus on artificial intelligence.⁵

Equity markets ended lower on Wednesday with big tech and small caps leading on the downside. The second estimate of US Q4 GDP was revised lower by 1bp to an annual rate of 3.2%. The Core PCE Price Index was revised higher by 0.1% to a 2.1% annual rate.⁶ Markets struggled to find direction as investors waited for key economic updates coming later in the week.

US markets ended the day on Thursday near their best levels. January headline PCE and Core PCE prices were higher by 0.3% and 0.4%, respectively.⁷ Both numbers were in line with consensus and markets reacted positively on better-than-feared longer-term inflation expectations after last week’s CPI and PPI results. Personal Income rose 1% m/m, exceeding estimates of a 0.5% increase.⁷ Initial jobless claims ticked higher at 215K, above forecasts of 206K but still remaining at historically low levels.⁸

Equity markets powered higher on Friday, capping the fourth straight month of gains. The S&P 500 has been higher for 16 out of 18 weeks for the first time in over 50 years. The NASDAQ Composite ended the day at all-time highs and is now above its November 2021 high. The ISM Manufacturing Index fell to 47.8%, below estimates of 49.5% and marking the 16th straight month in contractionary territory.⁹ Despite the sizable drop, commentary was positive and highlighted accelerating demand and a stable outlook.⁹

Sources

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