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Weekly Recap | February 20, 2024

Weekly Recap | February 20, 2024

February 21, 2024
Weekly Recap

February 12-16, 2024 Recap

S&P 500 Ends Five-Week Winning Streak

Small Caps Outperform Another Week
All three major U.S. equity indices ended lower last week after stronger than expected consumer and wholesale inflation reports pushed out the timeline for when the Federal Reserve is expected to begin lowering interest rates. Market expectations are now centering on June as the most likely time for the Fed’s first rate reduction. Earlier in the week, the S&P 500 posted its 11th new all-time high this year, supported by improving corporate earnings.

For the Week…
The S&P 500 slipped 0.35% last week, ending a five-week winning streak. The Dow Jones Industrial Average inched 0.02% lower while the tech-heavy Nasdaq Composite fell 1.31%. The small cap focused Russell 2000 Index outperformed another week (+1.17%), led by a 1.40% gain among its value components whereas its growth counterparts rose a lesser 0.94%.

Wholesale Inflation Tops Forecasts
The Producer Price Index (PPI) rose 0.3% in January, beating expectations. This follows a 0.1% December decline and brings the index up 0.9% from a year ago. The stronger-than-expected January PPI was due to a 0.6% rise in services-based prices (the largest increase since July 2023), whereas goods prices fell 0.2%. The core PPI (excludes food and energy) rose 0.5% (+0.1% forecast) following -0.1% the month prior and is up 2% from a year ago.

Weekly Sector Insights
This year’s sector leaders saw haircuts last week, with Technology (-2.41%) and Communication Services (-1.61%) falling the most. Of the seven sectors posting a weekly gain, Energy (+2.71%), Materials (+2.39%), and Utilities (+1.60%) were the top performers. On a year-to-date basis, Communication Services (+10.24%) and Technology (+7.59%) continue to top the 2024 year-to-date leaderboard.

Treasury Yields Climb
Implications over the sticky inflation readings pushed Treasury yields higher last week. The yield on 10-year Treasury notes had briefly topped 4.3% on Friday before ending at 4.290%, up 0.12% for the week. The yield on Fed policy-sensitive 2-year Treasury notes had reached 4.70%, its highest since December.

The Latest from @CeteraIM

Consumer Optimism Grows

Consumer Inflation Tops Forecast

Retail Sales Slow

Economic Calendar

Monday, February 19
Washington’s Birthday (President’s Day), All Markets Closed.

Tuesday, February 20
Leading Economic Indicators.

Wednesday, February 21
Mortgage Activity, FOMC Minutes.

Thursday, February 22
Jobless Claims, Chicago Fed National Activity, S&P flash Service/Manufacturing PMIs, Existing Home Sales.

Friday, February 24
No Major Releases.

As megacap growth stocks push the S&P 500 higher, the weight of the top 10 holdings in the index has grown to a 22-year high of 33.8%, indicating that the index is becoming more concentrated. It can get more extreme. The top 10 holdings grew to 40% of the index at the peak of the tech bubble in March 2000.

This report is created by Cetera Investment Management LLC. For more insights and information from the team, follow @CeteraIM on Twitter.

About Cetera® Investment Management
Cetera Investment Management LLC is an SEC registered investment adviser owned by Cetera Financial Group®. Cetera Investment Management provides market perspectives, portfolio guidance, model management, and other investment advice to its affiliated broker-dealers, dually registered broker-dealers and registered investment advisers.

About Cetera Financial Group
“Cetera Financial Group” refers to the network of independent retail firms encompassing, among others, Cetera Advisors LLC, Cetera Advisor Networks LLC, Cetera Investment Services LLC (marketed as Cetera Financial Institutions or Cetera Investors), and Cetera Financial Specialists LLC. All firms are members FINRA / SIPC. Located at 655 W. Broadway, 11th Floor, San Diego, CA  92101.

Disclosures
Individuals affiliated with Cetera firms are either Registered Representatives who offer only brokerage services and receive transaction-based compensation (commissions), Investment Adviser Representatives who offer only investment advisory services and receive fees based on assets, or both Registered Representatives and Investment Adviser Representatives, who can offer both types of services.

The material contained in this document was authored by and is the property of Cetera Investment Management LLC. Cetera Investment Management provides investment management and advisory services to a number of programs sponsored by affiliated and non-affiliated registered investment advisers. Your registered representative or investment adviser representative is not registered with Cetera Investment Management and did not take part in the creation of this material. He or she may not be able to offer Cetera Investment Management portfolio management services.

Nothing in this presentation should be construed as offering or disseminating specific investment, tax, or legal advice to any individual without the benefit of direct and specific consultation with an investment adviser representative authorized to offer Cetera Investment Management services. Information contained herein shall not constitute an offer or a solicitation of any services. Past performance is not a guarantee of future results.

For more information about Cetera Investment Management, please reference the Cetera Investment Management LLC Form ADV disclosure brochure and the disclosure brochure for the registered investment adviser your adviser is registered with. Please consult with your adviser for his or her specific firm registrations and programs available.

No independent analysis has been performed and the material should not be construed as investment advice. Investment decisions should not be based on this material since the information contained here is a singular update, and prudent investment decisions require the analysis of a much broader collection of facts and context. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The opinions expressed are as of the date published and may change without notice. Any forward-looking statements are based on assumptions, may not materialize, and are subject to revision.

All economic and performance information is historical and not indicative of future results. Investors cannot directly invest in unmanaged indices. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability, and differences in accounting standards.

Glossary

The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. 

The S&P 500 is an index of 500 stocks chosen for market size, liquidity and industry grouping (among other factors) designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe. 

The NASDAQ Composite Index includes all domestic and international based common type stocks listed on The NASDAQ Stock Market. The NASDAQ Composite Index is a broad based index. 

The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe and is a subset of the Russell 3000 Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership. 

The Russell 3000 Index measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market. 

The Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity universe and is a subset of the Russell 1000 Index. It includes approximately 800 of the smallest securities based on a combination of their market cap and current index membership. 

The Bloomberg US Aggregate Bond Index, which was originally called the Lehman Aggregate Bond Index, is a broad based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government–related and corporate debt securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS and CMBS (agency and non-agency) debt securities that are rated at least Baa3 by Moody’s and BBB- by S&P. Taxable municipals, including Build America bonds and a small amount of foreign bonds traded in U.S. markets are also included. Eligible bonds must have at least one year until final maturity, but in practice the index holdings have a fluctuating average life of around 8.25 years. 

The Bloomberg US Corporate High Yield Index measures the USD-denominated, non-investment grade, fixed-rate, taxable corporate bond market. Securities are classified as high yield if the middle rating of Moody's, Fitch, and S&P is Ba1/BB+/BB+ or below, excluding emerging market debt. Payment-in-kind and bonds with predetermined step-up coupon provisions are also included. Eligible securities must have at least one year until final maturity, but in practice the index holdings has a fluctuating average life of around 6.3 years. 

The Bloomberg US Municipal Bond Index covers the USD-denominated long-term tax exempt bond market. The index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds, and prerefunded bonds. Eligible securities must be rated investment grade (Baa3/BBB- or higher) by Moody’s and S&P and have at least one year until final maturity. 

The MSCI EAFE Index is designed to measure the equity market performance of developed markets (Europe, Australasia, Far East) excluding the U.S. and Canada. The Index is market-capitalization weighted. 

The MSCI Emerging Markets Index is designed to measure equity market performance in global emerging markets. It is a float-adjusted market capitalization index. 

The Bloomberg Commodity Index is a broadly diversified index that measures 22 exchange-traded futures on physical commodities in five groups (energy, agriculture, industrial metals, precious metals, and livestock), which are weighted to account for economic significance and market liquidity. No single commodity can comprise less than 2% or more than 15% of the index; and no group can represent more than 33% of the index.

 The S&P GSCI Crude Oil Index is a sub-index of the S&P GSCI, provides investors with a reliable and publicly available benchmark for investment performance in the crude oil market.

 The S&P GSCI Gold Index, a sub-index of the S&P GSCI, provides investors with a reliable and publicly available benchmark tracking the COMEX gold futures market.

The U.S. Dollar Index is a weighted geometric mean that provides a value measure of the United States dollar relative to a basket of major foreign currencies. The index, often carrying a USDX or DXY moniker, started in March 1973, beginning with a value of the U.S. Dollar Index at 100.000.