Weekly Recap:

by Michael P. Reinking, CFA - Sr. Market Strategist

Last week was an ugly week for US equities following the FOMC policy decision with the S&P 500 ending the week down 2%. There was a bounce on Friday after the PCE report came in slightly better than expected helping the index cut losses by about a third from the lows and close just over its 50d ma. However, the Dow Jones Industrial Average, S&P 400 Midcap and Russell 2k all extended their weekly losing streaks to three weeks closing down nearly 5%.

As expected, it has been a pretty quiet holiday interrupted week of trading. There was a modest bounce to start the week. The Santa Clause rally kicked off with bang in half day of trading on Tuesday. Markets extended slightly higher on Thursday with the S&P 500 recouping all of the post Fed selloff. However, the week ended on a sour note with the index falling >1% today. Today's selloff was pretty broad based, but it was most pronounced in the mega-cap tech stocks and this year’s best performers. The top 10% of YTD performers in the S&P 500 were down an average of 1.3% while the bottom 10% were down 0.4%.

Despite today’s selloff US equities ended the week slightly higher breaking a 2-week losing streak for the S&P 500 and a three-week losing streak for other indices.

Global Markets - were mostly higher with some outperformance in Asia. Emerging markets underperformed for the week.

Commodities - mixed week. 

Oil - ICE Brent recouped some of last week’s losses closing back above its 50d ma.

Nat gas - gas prices made another run at $4 but failed again with a big reversal day yesterday ending the week modestly lower. Prices in Europe were up sharply. 

Metals - were mixed. Gold failed to break back above its 50d.

Ag - ended the week with gains. 

Bitcoin - never got much follow through after last Friday’s reversal and pulled back today ending the week down ~3% at ~93.5k. 90-92k has been a support zone on the last few pullbacks so an area to watch. The rising 50d ma is currently ~88.5k and will be right around that same area in a couple of days.  

After the brief pullback last Friday following the PCE report yields moved higher again this week particularly at the long end of the curve. 10-30yr yields were up ~9bps this week and are hovering right above the post-election highs and just below the April highs ~4.75% which will be an important level to watch. The 2-10 spread is out to 0.3% the highest level since mid-2022.

The 2-10 spread is out to 0.3% the highest level since mid-2022.

Through yesterday investment grade spreads were tighter by 1-2bps for the week.

High yield - US spreads tightened by 5bps, Europe was 3bps wider and EM was unchanged.

The ICE Bank of America (ICE BofA) total returns for indices covering the U.S. were on either side of unchanged.

A brief note on the Santa Clause Rally and the other seasonal gauges popularized by the Stock Trader’s Almanac. The January Indicator Trifecta is made up of three time period measurements which have debatably provided some guidance about the strength of the year ahead. The Santa Clause Rally is measured as the final five trading days of the year and the first two of the following year. Historically the S&P 500 has been up a little more than 75% of the time during this measurement period by an average of ~1.3%. It is the years where the market has not ended higher where there is some more concern. The second barometer is the first five trading days of the year and the final of the Trifecta is the entirety of the month of January. When looking at the extremes of these indicators since 1950 there have been 8 instances where all three were negative. Even under that scenario the market has ended the year up in 5 instances but the average return is -3.6% while the median is 1.8%. On the flip side there have been 31 instances where all three were positive stocks have ended those years up 28 times. The average and median returns under this scenario are much stronger up 17.5% and 17.3%, respectively. As with any seasonal indicator you can’t look at them in a vacuum but it is worth paying attention to. For the record this year the SCR and FFD were both negative, but the month of January was higher and things ended up pretty good. 

Next week will still have a holiday feel with 2024 trading drawing to a close on Tuesday. It is a full trading day for equities with credit markets closing at 2:00. The calendar remains pretty quiet. The key  global economic data includes China PMIs and final S&P manufacturing PMIs. In the US housing data, claims and the ISM manufacturing survey are the highlights. This will be my last note of 2024. Once again, I'd like to thank you for reading and I'm grateful to be in a position to share my perspective with a captive audience. Wishing you and yours a happy, healthy and prosperous 2025!

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