The major U.S. stock indexes slipped for the second week in a row, as the market’s strong daily gain on Tuesday was offset by declines later in the week.
The recent two-week retreat was in contrast with the four-month rally that preceded it—a period when the S&P 500 rose 16 out of 18 weeks.
Last week growth stocks lagged and small caps outperformed large caps, while mega-cap tech shares lagged due in part to a decline in Apple following reports about slowing iPhone sales in China. The Russell 2000 Index gained 0.3% (+3.0% YTD). The technology-heavy Nasdaq Composite declined -1.1% (+7.3% YTD).
Amid tightening oil supplies, the price of U.S. crude rose around 4% for the week, reaching a peak of around $81.60 per barrel on Thursday afternoon. Although the price slipped to around $81.00 on Friday, oil remained near its highest level in more than four months.
A week after hitting a record high, the price of the most widely traded cryptocurrency, Bitcoin, pushed even higher, eclipsing $73,000 on Wednesday. However, Bitcoin’s price pulled back later in the week, and it was trading around $68,000 on Friday, close to where it ended the previous week. Year to date, the cryptocurrency was up more than 60%.
The bull market has extended to more new all-time highs on many indices, with the mood brightening into what is looking increasingly like full-blown optimism.
Stocks are now up more than 30% over the last 12 months and more than 40% from the 2022 bear market low. Since last spring’s dip, we’ve experienced only one notable phase of volatility, with equities seeing a 10% correction from August through October. The S&P 500 hit a new record high last week as stocks have ridden a wave of enthusiasm around technology, economic growth, and approaching rate cuts.
With positive Fed rate cut expectations in the months ahead, the underpinnings of the bull market may have strengthened. Also, corporate earnings are on the rise and should provide support for further gains. Although the majority of last year’s strong stock market return was attributed to a small number of mega-cap tech names, market leadership is also showing signs of broadening out, a healthy trend that we expect
might continue this year.
However, the stock market’s recent sharp run higher, combined with glimmers of what I’d describe as complacency, does make this market susceptible to heightened
volatility and knee-jerk reactions in response to any disappointing data or headlines.
This is no time to be complacent and, as a result, I am calling for heightened vigilance by paying close attention to internal market technicals. You will likely need to maintain a much more protective stance in the days and weeks ahead.
And remember, trade what you SEE not what you think!
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