TRG Fast Facts
By TRG Advisors on February 9, 2024
Weekly data-driven insights on the markets and economy
1. High Hopes
The S&P 500 rose Wednesday, adding 0.7% and edging closer to the 5,000 level for the first time. Investors parsed through another round of quarterly results and are optimistic going into the back half of the earnings season. A part of fresh quarterly results this week, Snap dropped nearly 35% after missing revenue and providing weak guidance, while Ford gained 4.7% after beating estimates and issuing higher-than-expected guidance.[i]
2. Lingering Questions
U.S. Treasury yields fell on Tuesday as investors continue to question the path ahead for interest rate cuts and the timeline. The 10-year Treasury dropped 8 bps to 4.09%, and the 2-year also dropped more than 7 bps to 4.40%. Some investors were hopeful for rate cuts as soon as March, but comments from Fed Chair Powell dampened these expectations.[ii]
3. Sizzling Jobs
The Labor Department’s employment report released Friday showed the unemployment rate at 3.7% last month, remaining below 4% for two consecutive years. Job growth accelerated and wages increased the most in nearly two years. Nonfarm payrolls increased by 353,000 jobs last month, and 126,000 more jobs were added in November and December than previously reported. Employment gains totaled 3.1 million, beating the estimated 2.7 million. These signs of strength in the labor market could keep the Fed from cutting rates in May as previously anticipated.[iii]
4. Bipartisan Aid
Senators released the details of a $118.2 billion bipartisan aid proposal for Ukraine, Israel and the southern U.S. border on Sunday and then promptly backtracked. The long-awaited bill requested $60.1 billion for Ukraine aid, $14.1 billion for Israel and $20.2 billion to improve security at the U.S. border. The bill had already met stark opposition from House Republicans who proposed their own Israel-only funding package, which subsequently also failed to pass this week.[iv]
5. Limited Gains
Oil prices rose about $1 per barrel on Monday with concerns that tensions in the Middle East and Russia’s ongoing invasion of Ukraine could curb global supplies. Brent crude futures rose by 66 cents, or 0.9%, to $77.99 a barrel, and U.S. West Texas Intermediate crude futures rose to $72.78 a barrel, up 50 cents, or 0.7%. Both contracts gained for the first time in four sessions.[v]
6. AI Boom
Chipmaker Nvidia’s shares reached a new peak on Monday, raising about 4% to $689.21. Goldman Sachs raised its price target for the stock to $800 in anticipation of a major boost to its earnings from the AI boom. Nvidia was valued at $1.63 trillion as of Friday’s close. The stock price is already up 39% so far this year, with shares trading at 31.4 times the company’s forward earnings estimate. Nvidia is set to report results on February 21; analysts are expecting fourth quarter earnings per share of $4.51 and revenue of $20.19 billion.[vi]
7. Cali Downpour
The storm in California this week has killed two people and caused as much as $11 billion in damage and economic losses. After more than 10 inches of rain fell in the mountains west of Los Angeles, making it one of the wettest two-day periods in 147 years, AccuWeather calculated the estimated losses at $9 to $11 billion. Governor Gavin Newsom declared a state of emergency in eight counties on Sunday.[vii]
8. Spring Comes Early
In the annual Groundhog’s Day tradition, Punxsutawney Phil did not see his shadow. According to the legend, this means we’re in for an early spring. This is the first time since 2020 that Phil predicted early spring, and just the 21st time since records of his predictions have been kept. Prior to 2024, he had seen his shadow 107 times and not seen it 20 times.[viii]
[i] Subin, Samantha and Brian Evans, “S&P 500 rises, nears 5,000 level: Live updates,” CNBC, February 7, 2024, https://www.cnbc.com/2024/02/06/stock-market-today-live-updates.html. Accessed February 7, 2024.
[ii] Subin, Samantha, and Sophie Kinderlin, “Treasury yields fall as uncertainty over rate cut outlook persists,” CNBC, February 6, 2024, https://www.cnbc.com/2024/02/06/us-treasury-yields-as-uncertainty-over-rate-cut-outlook-persists.html. Accessed February 7, 2024.
[iii] Mutikani, Lucia, “US labor market sizzles with blowout job growth, solid wage gains,” Reuters, February 2, 2024, https://www.reuters.com/markets/us/us-job-growth-surges-january-wages-rise-2024-02-02/. Accessed February 7, 2024.
[iv] Picciotto, Rebecca, “Senate releases $118 billion bipartisan aid proposal for Israel, Ukraine, border security,” CNBC, February 4, 2024, https://www.cnbc.com/2024/02/04/senate-emergency-aid-proposal-israel-ukraine-border-.html. Accessed February 7, 2024.
[v] Khan, Shariq, “Oil rises nearly 1% as traders assess worsening geopolitical situation,” Reuters, February 5, 2024, https://www.reuters.com/business/energy/oil-prices-steady-gaza-ceasefire-talks-even-us-plans-middle-east-strikes-2024-02-05/. Accessed February 7, 2024.
[vi] “Nvidia hits record high as Goldman Sachs boosts PT on AI prospects,” Reuters, February 5, 2024, https://www.reuters.com/technology/nvidia-eyes-fresh-record-goldman-sachs-bullish-ai-prospects-2024-02-05/. Accessed February 7, 2024.
[vii] Chediak, Mark, John Gittelsohn and Brain Sullivan, “California Storm Causes as Much as $11 Billion in Damages,” Bloomberg, February 5, 2024, https://www.bloomberg.com/news/articles/2024-02-05/landslides-threaten-hollywood-hills-as-floods-soak-california?embedded-checkout=true. Accessed February 7, 2024.
[viii] DeLetter, Emily, “Did the groundhog see his shadow? See results of Punxsutawney Phil’s 2024 winter forecast,” USA Today, February 2, 2024, https://www.usatoday.com/story/news/nation/2024/02/02/groundhog-day-2024-shadow-results/72409638007/. Accessed February 7, 2024.