It wasn't a bad week for financial markets, but it sure seemed that traders and their normal optimism couldn't get out of the way of, well, stuff, which seemed more interesting than the reality.
The fact is the Nasdaq Composite had a pretty good week, up 3.1%. The Nasdaq-100 Index was up 3.2%. The Standard & Poor's 500 Index hit a 52-week high at 4,802.40 on Friday before finishing the day up 0.1% at 4783.83 but up 2% on the week. The Dow Jones industrials added 0.34%.
Oil prices were up a little. Gas prices kept falling, and there is still every reason to believe the Federal Reserve will cut interest rates. Only the when is unclear.
Is the January effect going to be a thing?
So perhaps the worries that a January decline for stocks generally will lead to a decline in 2024 are overblown.
Still, there was all this stuff. Such as:
- The starling news that Citigroup (C) -) wants to chop 20,000 jobs after it reported its worst quarter in 14 years.
- Car-rental giant Hertz (HTZ) -) said Thursday it was selling some 20,000 Teslas, Volvos, Polestars and others -- a third of its electric-vehicle fleet -- because of high maintenance and repair costs. Hertz shares were off 6.8% on Friday and are down 19.7% since Dec. 29. Tesla (TSLA) -) slumped 7.8% on the week.
- The bizarre blowout of a door plug in an Alaska Airlines (ALK) -) plane that had just left Portland, Ore. The FAA grounded all 737 9 Max airliners that Boeing (BA) -) has delivered until investigators figure out the cause. Boeing shares, off 12.6% last week, are already down 16.5% for the year.
- British and U.S. navies fired on Houthi rebels in Yemen who had attack commercial vessels moving into the Red Sea to pass through the Suez Canal, a sign that the Hamas-Israel conflict is expanding.
So, does something need to save the market?
Patience will help.
Related: Analyst predicts Qualcomm stock rally, unveils new price target
Remember: The fourth-quarter earnings season has just begun, dominated by reports from banks, brokerages and others.
It will swing into higher gear this week and next with peak reports coming at the end of the month and into mid-February. Microsoft (MSFT) -) is expected to report its results in the last week of January. Apple (AAPL) -) reports first-quarter results on Feb. 1.
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As important, the Fed holds its first two-day meeting on Jan. 30-31 and may offer clearer signals on when the expected first rate cut will arrive. Wall Street is expecting six rate cuts this year, starting in March, though some consider the timing and number of cuts to be irrational exuberance.
The Fed's key federal funds rate is at 5.25% to 5.5%. It's the key rate from which nearly all U.S. interest rates are derived.
Interest rates have fallen since October. The 10-year Treasury yield is at 3.944% after briefly topping 5% on Oct. 19.
The yield is important because it heavily influences mortgage rates. Home buyers and sellers are hoping for lower rates to add fuel to the housing markets. Mortgage News Daily put the national average rate on a 30-year mortgage at 6.69% on Saturday, down from nearly 8% in October.
Nvidia push lights a fire
But tech, especially Big Tech (but maybe not Tesla yet), looks to be the deciding factor.
Look what happened this week just to Nvidia (NVDA) -). The shares fell in the week after New Year's but jumped 11.4% this past week.
The catalyst was announcements of new chips targeted at artificial intelligence, personal computers and gaming and new partnerships with Amgen (AMGN) -) and others. Amgen hopes Nvidia-powered machines can help in drug discovery and data insights.
More from markets:
- Why Citigroup is cutting 20,000 jobs
- Bond markets are reacting to key data that could be great for stocks
- Veteran fund money manager touts 'sleep-well-at-night' stocks
Salesforce.com (CRM) -) jumped 8.3%. Microsoft added 5.6%. Amazon.com rose 6.5%.
Midcap and smallcap stocks largely did not participate this week.
So much for the market broadening out. Already, technology is sucking money into its orbit.
If techs drag the market sharply higher again, there's the risk U.S. markets may become as overbought as they were in December. And that could means a sharper pullback than we've seen since before Christmas.
Two other risks that should be top of mind for anyone making buy or sell decisions:
- The political environment is so fraught that a partial government shutdown is likely, despite reports a spending deal is in the works.
- The three-horned monster of conflicts in the Middle East, Ukraine and Taiwan could explode. causing oil prices to shoot up and inflation reignites.
