Market goes out (nearly) on top

Last year was surprising on many fronts, so perhaps it’s fitting that the stock market dashed a few expectations in its final week.

Last Wednesday it certainly looked like the year-end rally could be capped by a new all-time high from the S&P 500 (SPX). But after a near-miss last Thursday, the index followed its seasonal tendency to fall on the last trading day of the year, although it still managed to push its streak of consecutive up weeks to nine:

The headline: SPX misses record, but stocks end year on rare winning streak.

The fine print: Focusing on what the SPX didn’t do last week misses the point. The index, which was up only 7.2% for the year on October 27, ended 2023 up 24.2%—its fifth-biggest annual return of the past quarter century, and nearly three times its average over the past 67 years. Its nine-week win streak is the longest since 2004.

The move: Last Wednesday, the benchmark 10-year T-note yield closed at its lowest level (3.79%) since July 19. It also posted its biggest two-month decline (102 basis points) since December 2008.

The scorecard: The Dow may have trailed the pack in 2023, but it came out on top in the final week of the year:

Sector returns: The strongest S&P 500 sectors last week were consumer staples (+1.7%), health care (+1.4%), and utilities (+1.3%). The weakest sectors were energy (-1.14%), consumer discretionary (-1.07%), and communication services (-0.2%).

Stock movers: Cytokinetics (CYTK) +83% to $83.44 on Wednesday, Annovis Bio (ANVS) +28% to $19.62 on Wednesday. On the downside, Neogenomics (NEO) -18% to $16.79 on Thursday, Hut 8 (HUT) -17% to $13.34 on Friday (after falling 11% to $16.13 on Thursday).

Futures: February WTI crude oil (CLG4) closed last week at a nearly two-week low of $71.32. February gold (GCG4) ended the final week of the year with a modest gain at $2,072.40. Week’s biggest gains: March aluminum (ALH4) +6.3%, March oats (ZOH4) +6.1%. Week’s biggest losses: March palladium (PAH4) -9.7%, January VIX (VXF4) -9%.

Jobs and minutes from the Fed’s December policy meeting highlight the first week of the New Year:

●Tuesday: S&P Global Manufacturing PMI, Construction Spending
●Wednesday: ISM Manufacturing Index, Job Openings and Labor Turnover Survey (JOLTS), FOMC minutes
●Thursday: Challenger Job Cuts Report, ADP Employment Change, S&P Global Services PMI
●Friday: Employment Report, Factory Orders, ISM Services Index, Total Vehicle Sales

Earnings this week include:

●Wednesday: Cal-Maine Foods (CALM)
●Thursday: Conagra Brands (CAG), RPM (RPM), Simply Good Foods (SMPL), Walgreen’s (WBA), Aehr Test Systems (AEHR)
●Friday: Greenbrier (GBX), Constellation Brands (STZ)

Check the Active Trader Commentary each morning for an updated list of earnings announcements, IPOs, economic reports, and other market events.

As discussed in “The January shift,” the first month of the year doesn’t have a stellar track record of signaling the stock market’s direction for the entire year. But the first week of January may be a different story—at least in terms of correlating to the market’s direction for the month.

Since 1957, of the 44 times the SPX posted a net gain over the first five trading days of January, it went on to have a positive January return 32 times (73%).¹ Of the 23 times the first five trading days resulted in a net loss, January turned out to be a down month 16 times (70% of the time).

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¹ Reflects S&P 500 (SPX) daily closing prices, 12/30/56–1/10/23. Supporting document available upon request.