Weekly Market Performance — March 15, 2024

LPL Research provides its Weekly Market Performance for the week of March 11, 2024. It was a mixed week for the broader equity markets. Overall, the trend remains positive with most major indexes hovering just below all-time highs.  The second month in a row of bothersome headline inflation data saw bond yields move higher as the timing and scope of this year’s anticipated rate cuts from the Federal Reserve (Fed) come further into question. The uptick in inflation was a positive for commodities and related equities. Notably, the Energy Select Sector Index approached its highest level in five months and sharply outperformed the broader market.

Stock Index Performance

S&P 500 Index Sectors

Fixed Income and Commodities

Source: LPL Research, Bloomberg 03/15/24 at 2:00 p. m. ET
Disclosures: Indexes are unmanaged and cannot be invested in directly.

U.S. and International Equities

Markets Mixed: The S&P 500 managed a new record high close on Tuesday but finished the week off its best levels. More pronounced weakness was seen in the small cap space as the Russell 2000 bore the brunt of the uptick in U.S. headline inflation data and the subsequent move higher in rates. A beneficiary of the inflation data was the energy sector, which solidly outperformed the broader market to trade near five-month highs. 

Earnings Growth: The consensus 2024 average EPS estimate is now around   $243, which equates to an 11% growth rate in earnings for this year and a slight improvement from the prior week. What is more positive is that the 2025 growth rate is expected to witness an increase of over 13%. Strategas noted that upward earnings revisions for any given calendar year are rather unusual for index earnings.  

Sentiment Bullish but Waning: According to the most recent American Association of Individual Investors (AAII) survey, investor bullish sentiment declined from over 51% to near 46% this week. Neutral investor sentiment increased, while bearish sentiment essentially stayed the same as last week. The percentage of bullish investors remains well above the long-term historical average of 37.5%.          

Fixed Income Lower: The Bloomberg Aggregate Bond Index finished the week sharply lower and took back last week’s gains following a second straight month of inconvenient headline inflation data. Remarkably, high yield bond spreads traded to their tightest levels in more than two years.      

U.S. investment grade credit flows remain robust, with inflows now totaling $77.4 billion in 2024. This represents over 40% of full-year 2023 inflows to investment grade bonds and compares to an outflow of $164.3 billion in 2022. In yet another reminder that supply follows demand, investment grade spreads are tighter despite record issuance for a February with $194 billion printing, which is 28% higher than the prior record of $152 billion set just last year and 76% higher than the four-year average for February. 

Commodities Higher: West Texas Intermediate (WTI) crude prices traded to over $80 a barrel this week amid the seasonal pickup in demand. Moreover, lower-than-expected crude oil stockpiles in the U.S., according to the Energy Information Administration (EIA), helped underpin higher prices. Moreover, Ukrainian forces have successfully targeted a series of Russian refiners, disabling an important source of funding for Moscow’s war effort. Gold prices moved sideways while silver prices rallied. India has allowed its central bank to import gold without paying import levies as central bank buying continues to support the precious metal’s price.  

Economic Weekly Roundup

February Consumer Price Index (CPI): Consumer prices increased 0.4%, which was a slight acceleration from January, increasing the annual rate of inflation to 3.15% from 3.09%. In addition to shelter and gas, consumer prices for airfares, vehicle insurance, and clothing all increased in February. Consumers still have a strong appetite for travel as consumer discretionary companies benefited. However, not all prices rose last month. Personal care items and household furnishings were a bit less expensive in February. 

LPL Research believes the current inflation environment is similar to the concentration in the equity markets right now. Outside of shelter and gas prices, inflation would be benign. The long-term disinflation trajectory has probably not changed, but the path to the Fed’s 2% target will not be linear.  We expect markets struggle with what this means for Fed policy.  

February Retail Sales: Amid inflationary pressures, retail sales increased 0.6% in February from January, less than what economists surveyed by FactSet expected. January retail sales previously posted a surprise 1.1% month-over-month decline. Building materials and garden equipment led the categorical gains last month. Moreover, sales gained 1.6% at motor vehicle and parts dealers, while electronics and appliance stores added an additional 1.5% increase to last month’s results. The largest detractors came from furniture and home furniture stores, where sales declined 1.1%. 

February Wholesale Prices: Wholesale prices increased at a faster-than-anticipated rate last month, another reminder that inflation remains a challenge for the U.S. The Producer Price Index increased 0.6% on the month, double Bloomberg’s consensus economists’ forecast. Two-thirds of the rise in headline wholesale prices came from a 1.2% surge in goods prices amid a 4.4% increase in energy prices. This represents the largest increase since August 2023. On a year-over-year basis, the headline index increased 1.6%, which is the largest move since September 2023. 

Weekly Employment Report: Initial and continuing claims came in at 209,000 and below analysts’ expectations of 218,000. LPL Research continues to believe the labor market is expected to further loosen over the coming months as companies respond to slowing demand, partly driven by the lagged effects of tighter monetary policy.  

The Week Ahead

The following economic data is slated for the week ahead:     

• Monday: NAHB Housing Market Index (Mar) 
• Tuesday: Building permits (Feb), housing starts (Feb), Bank of Japan meeting 
• Wednesday:  Federal Open Market Committee (FOMC) meeting  
• Thursday: Initial and continuing unemployment claims, current accounts (Q4), Purchasing Managers’ Index (PMI) Composite (Mar), S&P Global PMI Manufacturing and Services (Mar), existing home sales (Feb), leading indicators (Feb) 
• Friday: Export and import price index (Feb), capacity utilization (Feb), industrial production (Feb), manufacturing production (Feb), Michigan sentiment (Mar)