Wall Street posts small Friday win, but first weekly decline in ten

There was bad news and good news. The bad was a jobs report showing more hiring than expected, which ordinarily would be good news but, in this case, just douses the hopes of rate cuts coming sooner than later.  The good news was from the ISM report showing falling services sector activity pointing to a weakening economy. Again, this would ordinarily be bad news but in this case bolstered hopes for rate cuts coming sooner than later.  

So the skeptics were all selling and the optimists buying which created a lot of seesaw action today, the Dow swinging between green and red five times, up nearly 200 at its high, down over 100 at the low.  The odds of a March cut have today diminished to 66.4% vs last week’s 74.1%.  The better news is that the 3-strike losing streak was broken though all three benchmarks had their first weekly declines in ten weeks.  Volume remains below average at 11.2 billion. 

Wall Street posts small Friday win, but first weekly decline in ten

By David French

Fri January 5, 2024  6:44 PM

DJ: 37,440.34  +10.15        NAS: 14,510.30  -81.91         S&P: 4,688.68  -16.13      1/4

DJ: 37,466.11  +25.77        NAS: 14,524.07  +13.77        S&P: 4,697.24  +8.56       1/5

Jan 5 (Reuters) - U.S. stock indexes endured a topsy-turvy session on Friday but ultimately closed marginally higher, although the small gains did not stop the S&P 500 and Nasdaq Composite from starting 2024 with their worst weekly showing in months.  All three benchmarks recorded their first weekly declines for ten weeks: the S&P 500 (.SPX) dropped 1.54%, while the Nasdaq Composite (.IXIC) slumped 3.26%, and the Dow Jones Industrial Average (.DJI) dipped 0.59%.  For the S&P 500, it was its worst weekly performance since late October, while the Nasdaq posted its worst week since late September.

Investors have been cautious in the opening sessions of 2024, as they awaited further clarity on when interest rate cuts will begin, and how quickly they will happen.  Hopes for a swift pace of easing had triggered a blistering rally in the final weeks of 2023, which took the S&P 500 to within 1% of its all-time high, so any undermining of that hypothesis has been a cue for profit-taking.  "For now, it probably looks like a healthy correction for a market that was overbought at the end of last year," said Greg Boutle, head of US equity & derivative strategy at BNP Paribas.

Friday's session saw markets gyrate throughout the day, as investors absorbed the latest macroeconomic data which offered contrasting views on when interest rate cuts may begin.  Initially, robust jobs data in a report from the Labor Department, which showed U.S. employers hired more workers than expected in December, doused expectations of rapid easing of interest rates, pushing futures lower.  However, a survey from the Institute for Supply Management (ISM) then showed activity in the services sector fell in December, pointing to a weaker economy. That encouraged those betting on rapid easing, sending markets higher through the morning and into the afternoon.  Despite further undulations in the afternoon, ultimately the three benchmarks eked out a winning finish to the day - the first positive sessions of 2024 for the S&P and Nasdaq.

"In terms of the macro data, I think there's something for everybody, in terms of the data that we're seeing," said BNP's Boutle.  He added though that this week's data releases were unlikely to have convinced anyone to have changed their minds from their position on rate-cuts coming into the year.  Traders see a 66.4% chance of at least a 25-basis point cut in March, according to the CME Group's FedWatch tool. 

The yield on the benchmark U.S. Treasury 10-year note , reflecting interest rate expectations, finished the week at 4.05%.

The financials index (.SPSY) led gainers among the S&P 500 sectors, rising 0.5%, as banks continued to perform well ahead of the start of earnings season next week.  Large regional banks were buoyant, with Zions Bancorporation (ZION.O), Citizens Financial Group (CFG.N) and Comerica Inc (CMA.N) all rising between 2.6% and 3.3%. The S&P Banks index (.SPXBK) gained 1.3%, hitting an 11-month high. 

On Friday, the S&P 500 (.SPX) gained 8.56 points, or 0.18%, to end at 4,697.24 points, while the Nasdaq Composite (.IXIC) gained 13.77 points, or 0.09%, to 14,524.07. The Dow Jones Industrial Average (.DJI) rose 25.77 points, or 0.07%, to 37,466.11. 

Applied Therapeutics (APLT.O) tumbled 40.6% after the drug developer's heart disease drug showed disappointing results in a late-stage trial.  Palantir Technologies (PLTR.N) lost 1.7% after Jefferies downgraded the data analytics firm to "underperform" on high stock valuations.  Peloton (PTON.O) jumped 9.6% after the fitness equipment maker said it will bring its workout content to short-form video platform TikTok in an exclusive partnership. 

The volume on U.S. exchanges was 11.2 billion shares, compared with the 12.3 billion average over the last 20 trading days.