Market skips into spring

The big question last week was whether back-to-back months of rising inflation would prompt the Fed to delay the rate cuts stock investors have been banking on since last fall.

Last Wednesday the Fed answered by signaling a June cut was still on the table, and the S&P 500 (SPX) snapped a two-week losing streak with a breakout to fresh record highs and its biggest weekly gain of the year:

The headline: Indexes set fresh records as Fed stays course.

The fine print: While things could change between now and the Fed’s June policy meeting, Chairman Jerome Powell didn’t appear overly concerned about January and February’s high inflation readings in last week’s press conference: “I think they haven't really changed the overall story, which is that of inflation moving down gradually on a sometimes-bumpy road toward 2%. [W]e're not going to overreact to these two months of data, nor are we going to ignore them.”¹

The number: 5. The SPX can fall as much as 137.90 (2.6%) over the next five trading days and still log its fifth-straight up month—something it’s done only one other time since August 2021.

The scorecard: Nasdaq 100 (NDX) tech index led the market:

Sector returns: The strongest S&P 500 sectors last week were communication services (+4.8%), industrials (+3%), and information technology (+3%). The weakest sectors were real estate (-0.3%), health care (+0.5%), and consumer staples (+1%). In addition to last week’s relative strength, industrials are one of five sectors that have outperformed the SPX so far this year, possibly reflecting the broadening of leadership discussed by Morgan Stanley & Co. strategists in a recent podcast.²

Stock movers: On Tuesday, Fusion Pharmaceuticals (FUSN) +99% to $21.18, Enliven Therapeutics (ELVN) +39% to $17.54. On Thursday, Tourmaline Bio (TRML) -36% to $28.61, Spire Global (SPIR) -35% to $11.39.

Futures: April gold (GCJ4) hit a fresh record high of $2,225.30 last Thursday before ending the week with a slight loss at $2,160. April WTI crude oil (CLJ4) tagged a five-month high of $83.12 last Tuesday, then pulled back to end the week little changed at $80.63. Week’s biggest rallies: May cocoa (CCK4) +11.5%, September Uranium (UXU4) +6.5%. Week’s biggest declines: March ether (ETHH4) -10%, June palladium (PAM4) -8.6%.

The PCE Price Index (Fed inflation), durable goods, and housing numbers highlight the economic calendar:

●Monday: Chicago Fed National Activity Index, New Home Sales
●Tuesday: Durable Goods Orders, S&P Case-Shiller Home Price, FHFA House Price Index, Consumer Confidence
●Thursday: GDP (Q4, final), Consumer Sentiment, Pending Home Sales
●Friday: Personal Income and Spending, Trade Balance in Goods (advance), PCE Price Index, retail inventories (advance), wholesale inventories (advance)

This week’s earnings include:

●Monday: Chemours (CC)
●Tuesday: McCormick (MKC ), TD Synnex (SNX), Dave & Buster's (PLAY), Progress Software (PRGS)
●Wednesday: Cintas (CTAS), Paychex (PAYX), Braze (BRZE), RH (RH), Verint Systems (VRNT)
●Thursday: MSC Industrial Direct (MSM), Walgreen's (WBA), Semtech (SMTC)

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

Given the last time the SPX snapped a two-week losing streak with a 2%-plus up week was November 3, there may be traders wondering whether a similarly robust rally could unfold this time around.

Aside from the reality that a single point of comparison has no real analytical value, the market is in a very different place now than it was on November 3. In early November, the SPX had just bounced off its lowest low in more than five months, while last Friday it wrapped up its 10th-straight week of record highs.

Here’s how that difference played out in the market. Since 1950, the SPX interrupted a two-week losing streak with a 2%-or-larger up week 76 other times. One month later, the index was higher in 51 cases (67% of the time), with a 1.4% median return.³ But the SPX broke a two-week down losing streak with a 2%-plus up week—while also hitting its highest level in at least six months—only 18 other times. One month later the index was higher in only seven cases (39% of the time), with a -1.1% median return.

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¹ Federalreserve.gov. Transcript of Chair Powell’s Press Conference, March 20, 2024. 3/20/24.
² MorganStanley.com. Finding the Equity Sweet Spot. 3/18/24.
³ All figures reflect S&P 500 (SPX) weekly closing prices, 1950–2024. Supporting document available upon request.