How High is High?

NASDAQ Hits ATH!

KR Opinion

As we waltz into the last stretch of Q1, we're not just tiptoeing but rather cha-cha-ing our way to new highs, with the NASDAQ hitting an all-time peak. It's like the market's doing its own victory dance, and we might just see the S&P 500 join the party today. Overnight markets are looking steady—not exactly setting the world on fire, but we've got a bunch of economic reports dropping.

Among them, the University of Michigan's consumer confidence index is making its grand entrance. It's the kind of event that has everyone craning their necks to see, though I'm not holding my breath for any earth-shattering news.

In my last ramble, I couldn't help but marvel at the snooze-fest that is our current volatility levels. It's been lower than a limbo stick at a beach party, with the market bouncing off the 5060 mark like it's playing a game of pinball.

Despite this, I've got my eye on the prize, ready to dive into the nitty-gritty. The market's mood music seems to be switching up, with overhead Fibonacci magic and the algos hinting at a bit of a pep in our step for the next few days.

Deciphering the market's next move in this low-volatility snooze fest is like flipping a coin in a windstorm. Even though we saw a cheeky rebound from the 5060 level, the market's energy is still more of a lazy Sunday than a Saturday night fever. But hey, I'm all ears for Monday's gossip on the intermediate and long-term setup as Q1 takes its final bow.

I've been betting on a steady beat until we hit the end of February, with the first week of March looking promising. The market's been buzzing with whispers of potential Fed moves, maybe even a little soft-shoe on interest rates come summer. I'll start spilling the tea on this early March because the front end of the curve is riding a bit high for my taste and could use a trim.

Yield curve? It's more like a flat line waiting for a pulse. We're hovering in the 3.375 to 4.25 range, with a potential hop towards 4.50. But let's not get ahead of ourselves. The real show starts as we wrap up Q1 and peek into Q2, with the economy doing a bit of a jig.

Employment numbers gave us a little shimmy upwards, nudging towards 1.905 million in continuing claims. If this number waltzes over 2 million, we might need to brace for a bit of a dip in job numbers. But let's not get caught up in the maybes and what-ifs. We're dancing to these beats, at least until April rolls around. So, keep your dancing shoes ready; we've got some interesting times ahead.

Looking Back on Thursday’s Action

Today, the Nasdaq Composite Index rose by 0.9%, reaching a new all-time high. It was the final major U.S. stock index to achieve a record peak during the current upward trend that previously lifted the S&P 500 and Dow Jones Industrial Average to their highest closing levels earlier in the year.

The S&P 500 nearly surpassed the 5,100 mark before ending just below it, with a 0.5% increase, while the Dow Jones edged up by 0.1%, and the Russell 2000 gained 0.7%.For much of the trading day, the gains across the indices were modest, and the Dow even spent some time below its previous close. However, a surge in buying during the last hour, driven by significant gains in large-cap stocks, pushed the markets to close near their daily highs.

Notably, shares of Amazon, Microsoft, and Meta Platforms saw substantial increases in the late afternoon, contributing to the overall index gains. The stock market's subdued performance until the late surge reflected a lack of strong reaction to the morning's Personal Income and Spending Report for January, which met expectations without surprises, including a slight decrease in inflation rates as measured by the PCE Price Indexes.

Investor expectations for interest rate cuts remained stable, with the Fed funds futures market indicating a roughly 63.6% chance of a 25 basis point cut at the June Federal Open Market Committee (FOMC) meeting, virtually unchanged from the day before.

The afternoon's market improvement was broad, with nine of the S&P 500 sectors finishing higher. The information technology, communication services, and consumer discretionary sectors led the gains, thanks in part to Salesforce's stock rise after its earnings report. In contrast, the healthcare and consumer staples sectors closed lower.

In the bond market, Treasury securities gained, with yields on 2-year and 10-year notes decreasing slightly, responding to the morning's economic data.

Nasdaq Composite: +7.2% YTD
S&P 500: +6.8% YTD
Dow Jones Industrial Average: +3.5% YTD
S&P Midcap 400: +3.9% YTD
Russell 2000: +1.4% YTD

Reviewing today's economic data:

- Weekly Initial Claims 215K (KR Forecast consensus 206K); Prior was revised to 202K from 201K; Weekly Continuing Claims 1.905 million; Prior was revised to 1.860 million from 1.826 million

- The main insight from this report is that it's becoming harder to find a new job immediately, indicating a labor market that's not as robust as before.

- January Personal Income increased by 1.0% (KR Forecast consensus 0.5%); Previous month 0.3%. January Personal Spending increased by 0.2% (KR Forecast consensus 0.2%); Previous month 0.7%. January PCE prices rose by 0.3% (KR Forecast consensus 0.4%); the previous month was revised to 0.1% from 0.2%. January Core PCE Prices rose by 0.4% (KR Forecast consensus 0.4%); Previous month revised to 0.1% from 0.2%

  - The report's key insight is the year-over-year decrease in inflation as measured by the PCE Price Indexes, coupled with a decrease in real personal spending. These trends may lead to reduced forecasts for Q1 GDP growth. The combination of lower inflation and slower growth may encourage the Federal Reserve to consider reducing interest rates eventually.

- February Chicago PMI 44.0 (KR Forecast consensus 47.6); Previous month 46.0

- January Pending Home Sales -4.9% (KR Forecast consensus 1.0%); Previous month was revised to 5.7% from 8.3%

Friday's economic calendar includes:

- 9:45 ET: February S&P Global U.S. Manufacturing PMI (prior 49.1%)

- 10:00 ET: February ISM Manufacturing Index (KR Forecast consensus 49.5%; prior 49.1%), final February University of Michigan Consumer Sentiment (KR Forecast consensus 79.6; prior 78.8), and January Construction Spending (KR Forecast consensus 0.3%; prior 0.9%)

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