TRG Fast Facts

By TRG Advisors on February 16, 2024

Weekly data-driven insights on the markets and economy

1. Rally Fuel

After the December inflation reading came in lower than expected, the S&P 500 closed above 5,000 for the first time ever on Friday. The S&P 500 rose 0.57% to end at 5,026.61, while the Nasdaq Composite rallied 1.25% to close at 15,990.66. The Dow Jones Industrial Average slipped 54.64 points, or 0.14%, to settle at 38,671.69. This year’s rally has been fueled by a solid earnings season, easing inflation data and a resilient economy.[i]

2. Inflation Inquiries

The 10-year Treasury yield surged on Tuesday after inflation data came in stronger than expected for January. The 10-year rose 15 bps to 4.23% and the 2-year rose 19 bps to 4.66%. Tuesday’s data added to doubts that the Fed would be able to lower rates several times this year – markets continue to watch for signs of inflation cooling.[ii]

3. Surprise, Surprise

Inflation rose more than expected in January, with the consumer price index (CPI) up 0.3% for the month versus the expected 0.2%. Year-over-year CPI was 3.1% compared to the expected 2.9%. Core CPI, which excludes volatile food and energy prices, accelerated 0.4% in January and was up 3.9% from a year ago, unchanged from December. The forecast had been for 0.3% and 3.7%, respectively. Stubbornly high shelter prices accounted for much of the rise. The release comes as Federal Reserve officials look to set the proper balance for monetary policy in 2024.[iii]

4. Carrying Momentum

The Institute for Supply Management (ISM) said on Monday that its non-manufacturing PMI increased to 53.4 last month from 50.5 in December. A reading above 50 indicates growth in the services industry. New orders received by services businesses rose to 55.0 last month from 52.8 in December. A measure of prices paid for inputs by businesses increased to 64.0, the highest reading since last February, from 56.7 in December. This report suggested that the economy’s growth momentum from the fourth quarter has carried over into the new year.[iv]

5. New Endeavor

Diamondback Energy has acquired Endeavor Energy Partners, the largest privately held oil and gas producer in the Permian Basin, in a $26 billion deal. This would make the company the third largest oil and gas producer in the region, behind Exxon and Chevron. The deal would see the company pumping 816,000 barrels of oil equivalent per day and annual synergies of $550 million, coming up to more than $3 billion in net value over the next decade. Diamondback expects the deal to close in the fourth quarter and its stockholders are expected to own 60.5% of the combined entity, while Endeavor will own the rest.[v]

6. Bitcoin Breaks $50K

Coming off of its best week since December 8, Bitcoin ended 10.67% on Friday. Bitcoin jumped above $50,000 Monday, at one point reaching its highest level since December 2021. Its price was higher on Monday by 4% at $50,168.36. After big outflows from the Greyscale Bitcoin ETF suppressed sentiment, crypto is once again seeing positive sentiment and a pick-up of inflows.[vi]

7. Soaring Demand

Eli Lilly rode the soaring demand for diabetes and weight-loss treatments to a better-than-expected finish in 2023 and expects momentum to carry into the new year. Last Tuesday, Lilly said that revenue could climb as much as 22% this year, as star sellers like the diabetes drug Mounjaro and its new weight-loss counterpart, Zepbound, gain market share. Mounjaro sales jumped 65% to $2.21 billion in the fourth quarter compared with the third quarter, and Lilly is still struggling to make enough to keep up with demand. Zepbound, a new version of Mounjaro, registered about $176 million in sales during the final weeks of the fourth quarter, and is expected to reach around $1.9 billion in sales this year.[vii]

8. Prime Time Advertising

The NFL’s Super Bowl viewership skyrocketed from 115.1 million in 2023 to 123.4 million this year.[viii] This makes it a prime mass-marketing advertising space: a decade ago, the average cost of a 30-second spot was $4 million; a decade before that, it was $2.4 million. In 2023 and 2024, a 30-second spot was $7 million.[ix] Which brands do you think made the most of it?

[i] Subin, Samantha and Yun Li, “S&P 500 closes above 5,000 for first time ever, notches fifth straight winning week: Live updates,” CNBC, February 9, 2024, https://www.cnbc.com/2024/02/08/stock-market-today-live-updates.html. Accessed February 14, 2024.

[ii] Kailai Han, Lisa, Alex Harring, and Karen Gilchrist, “10-year Treasury yield shoots higher as January CPI is hotter than expected,” CNBC, February 13, 2024, https://www.cnbc.com/2024/02/13/10-year-treasury-yield-is-little-changed-as-investors-look-ahead-to-key-inflation-print.html. Accessed February 14, 2024.

[iii] Cox, Jeff, “Prices rose more than expected in January as inflation won’t go away,” CNBC, February 13, 2024, https://www.cnbc.com/2024/02/13/cpi-inflation-january-2024-consumer-prices-rose-0point3percent-in-january-more-than-expected-as-the-annual-rate-moved-to-3point1percent.html. Accessed February 14, 2024.

[iv] Mutikani, Lucia, “US service sector growth picks up in January – ISM survey,” Reuters, February 5, 2024, https://www.reuters.com/markets/us/us-service-sector-growth-picks-up-january-ism-survey-2024-02-05/. Accessed February 14, 2024.

[v] “Diamondback agrees to $26 billion deal to buy Endeavor Energy in growing Permian push,” CNBC, February 12, 2024, https://www.cnbc.com/2024/02/12/diamondback-energy-to-buy-endeavor-energy-in-26-billion-deal-.html. Accessed February 14, 2024.

[vi] Macheel, Tanaya, “Bitcoin extends its gains, breaking through the $50,000 level,” CNBC, February 12, 2024, https://www.cnbc.com/2024/02/12/crypto-market-today.html. Accessed February 14, 2024.

[vii] Murphy, Tom, “Weight loss, diabetes drugs propel Eli Lilly to largely better-than-expected forecast for 2024,” Yahoo!Finance, February 6, 2024, https://finance.yahoo.com/news/weight-loss-diabetes-drugs-propel-140754065.html. Accessed February 14, 2024.

[viii] Koblin, John, “Super Bowl Viewership Rose to 123.4 Million, a Record High,” The New York Times, February 12, 2024, https://www.nytimes.com/2024/02/12/business/media/super-bowl-ratings-record.html. Accessed February 14, 2024.

[ix] Nerkar, Santul, “$7 Million for 30 Seconds? To Advertisers, the Super Bowl Is Worth It.,” The New York Times, February 6, 2024, https://www.nytimes.com/2024/02/06/business/super-bowl-commercials.html. Accessed February 14, 2024.