PAS Weekly Commentary

Mega Cap and Semiconductor Stocks Lead Market Higher, Again

It was another winning week for the stock market. Small cap stocks saw some rebound action after underperforming to start the year.

The Russell 2000 jumped 2.4% this week. The S&P 500 closed above 5,000 for the first time, drawing support from gains in the mega cap and semiconductor spaces. The PHLX Semiconductor Index (SOX) rose 5.3%. 

Many stocks participated, though, in a relatively broad advance. The equal-weighted S&P 500 gained 0.5% this week. There still has not been any concerted selling interest despite reports that the market is overbought in the short-term, which has acted as its own upside catalyst.

Another catalyst for the upside price action came in the form of positive responses to some earnings news. Ford,  Eli Lilly, DuPont, Arm Holdings, and Walt Disney were among the standout earnings-related winners this week.

Meanwhile, Amgen and PayPal were some of the more influential earnings-related laggards. 

Notably, this week's broad advance occurred despite sharp declines in Treasuries. The 2-yr note yield rose 12 basis points to 4.50% and the 10-yr note yield rose 16 basis points to 4.19%. 

The increased selling in Treasuries started last week in response to ongoing strength in economic data of late that has the market repricing rate cut expectations. This also followed comments from Fed Chair Jerome Powell last weekend, who said on 60 Minutes that the Fed needs to see more evidence that inflation is moving sustainably down to its 2% target before lowering rates.

This week's release of the January ISM Services PMI featured an acceleration in services sector activity in January, replete with a pickup in new orders, employment, and prices. The weekly jobless claims report showed a decrease in the number of claims.

Also, the annual CPI revisions were released this week, garnering added attention due to potential implications for the Fed's rate cut path. The revisions were relatively friendly since they did not alter the market's view on inflation much.

Treasuries did not respond favorably to this week's slate of strong auctions, including a $25 billion 30-yr bond offering, a $54 billion 3-yr note sale, and $42 billion 10-yr note auction.

The probability of a 25 basis points rate cut to 5.00-5.25% at the May FOMC meeting is 63.1% now, down from 73.2% one week ago, according to the CME FedWatch Tool.

  • Nasdaq Composite: +2.3% for the week / +6.5% YTD
  • S&P 500: +1.4% for the week / +5.4% YTD
  • Dow Jones Industrial Average: +0.04% for the week / +2.6% YTD
  • S&P Midcap 400: +1.5% for the week / +1.0% YTD
  • Russell 2000: +2.4% for the week / -0.8% YTD

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Past performance is not a guarantee of future results. Indices are unmanaged and one cannot invest directly in an index. Diversification does not guarantee investment returns and does not eliminate the risk of loss.

Data and rates used were indicative of market conditions as of the date shown and compiled by Opinions, estimates, forecasts, and statements of financial market trends are based on current market conditions and are subject to change without notice. References to specific securities, asset classes and financial markets are for illustrative purposes only and do not constitute a solicitation, offer, or recommendation to purchase or sell a security. S&P 500 Index is a market index generally considered representative of the stock market as a whole. The index focuses on the large-cap segment of the U.S. equities market. Each company’s security affects the index in proportion to its market value. NASDAQ Composite Index is a market value-weighted index that measures all NASDAQ domestic and non-U.S. based common stocks listed on the NASDAQ stock market. Dow Jones Industrial Average is a widely used indicator of the overall condition of the stock market, a price-weighted average of 30 actively traded blue chip stocks, primarily industrials, but also includes financial, leisure and other service-oriented firms. Russell 2000 Index measures the performance of the smallest 2,000 companies in the Russell 3000 Index of the 3,000 largest U.S. companies in terms of market capitalization. MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

Park Avenue Securities LLC (PAS) is a wholly owned subsidiary of The Guardian Life Insurance Company of America (Guardian). PAS is a registered broker/dealer offering competitive investment products, as well as a registered investment advisor offering financial planning and investment advisory services. PAS is a member of FINRA and SIPC.

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2024-169199 (Exp. 5/24)