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Weekly Recap | January 8, 2024

Weekly Recap | January 8, 2024

January 08, 2024
Weekly Recap

January 2-5, 2024 Recap

Stocks End 9-Week Winning Streak

Rethinking Timing of Rate Cuts
After the S&P 500’s strong finish to 2023 (+26.29%) equities fell in the first week of 2024 amid a pullback in tech and consumer cyclical stocks that accompanied a resurgence in Treasury yields. Analysts noted stretched valuations after the 2023 runup while the Fed’s less dovish December FOMC meeting minutes and a stronger jobs report, pointed toward reduced expectations for rate cuts in the first quarter. All three major U.S. averages posted weekly declines for the first time since October, snapping their nine-week winning streaks.

For the Week…
The S&P 500 fell 1.50%, the Dow Jones Industrial Average slipped 0.56% and the tech-heavy Nasdaq Composite slumped 3.23% for its worst weekly performance since September. For the S&P 500, it was the worst one-week start to a year since 2016. Small caps also posted sharp weekly losses with the Russell 2000 Index down 3.73%.

Slippage in Services Activity
The ISM index of services sector activity fell in December to 50.6, the lowest since May 2023, missing forecasts for 52.6 and November’s 52.7. Readings for new orders slowed to 52.8 from 55.5 and employment fell to 43.3 from 50.7. More favorably, the prices paid component fell to 57.4 from 58.3 in November. Overall ISM readings above 50 indicate expansion, while readings below 50 signal contraction.

Weekly Sector Insights
Defensive stocks performed best for a second week, with Healthcare (+2.10%) and Utilities (+1.84%) up the most while Energy (+1.84) follows close behind. Financials (+0.40%) and Consumer Staples (+0.05%) rose the least. Amongst six declining sectors, Technology (-4.04%) and Consumer Discretionary (-3.45%) fell the most.

Treasury Yields Rise
The yield on 10-year Treasury notes ended Friday at 4.041%, up just over 0.16% for the week. Meanwhile, crude oil costs surged on supply disruptions concerns, including Red Sea attacks against shipping vessels by Yemeni Houthi forces in the gulf region. U.S. WTI crude oil futures rose over 2.2% to $73.81/barrel on Friday, climbing over 3% for the week.

The Latest from @CeteraIM

Stronger Payrolls in December

Auto Sales Hit 5-Month High

Jobs Openings Decline

Economic Calendar

Monday, January 8
NY Fed Inflation Outlook, Consumer Credit.

Tuesday, January 9
Small Business Optimism, U.S. Trade Deficit.

Wednesday, January 10
Mortgage Activity, Wholesale Trade Sales & Inventories.

Thursday, January 11
Jobless Claims, Consumer Price Index (CPI), Budget Statement.

Friday, January 12
Producer Price Index (PPI).

While average monthly jobs growth slowed to 225,000 per month last year from 399,000 per month in 2022, it still surpassed the 2018-19 pre-pandemic monthly average of 177,000. The unemployment rate was 3.7% at the end of 2023. We expect the labor market to normalize towards the pre-pandemic payroll growth trend in 2024.

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
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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.

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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.