S&P 500 (SPY) Report – 01/05/24

Good morning, traders!

The S&P 500 ($SPY) is trading below yesterday’s close. Let’s get into it… 

It’s Friday, and U.S. stock futures trade slightly lower this morning as the first trading week of the near year comes to an end. This shift is primarily attributed to a surprisingly robust jobs report, which has led to concerns about the Federal Reserve maintaining higher interest rates for an extended period. The S&P 500 is notably on the verge of breaking a nine-week streak of gains. This downturn in futures is reflected across major indices, with the Dow Jones Industrial Average, S&P 500, and Nasdaq 100 all showing decreases.

The U.S. economy has outperformed expectations in terms of job growth. In December, nonfarm payrolls saw an increase of 216,000 jobs, surpassing the 170,000 job growth predicted by economists. This significant job creation has kept the unemployment rate steady at 3.7%. However, this positive labor market data has had a mixed impact on the stock market, as it suggests the Federal Reserve might delay rate cuts that many traders have been anticipating to stimulate the economy.

The markets have reacted to this news with a degree of caution. Prior to this report, there was an 80% expectation of an interest rate cut in March, which has now decreased to around 53%, as per the CME FedWatch tool. The major stock averages, including the Nasdaq Composite, S&P 500, and Dow, are all facing potential breaks in their recent winning streaks. Additionally, large-cap tech stocks, such as Apple, have experienced a cooling-off, with some firms like Corient Wealth Management taking a step back from investing further in these stocks.

In summary, the first week of 2024 has seen a shift in the stock market, moving away from the optimism of the previous quarter. Doubts about the Federal Reserve’s policy changes and the recent strong labor market data have led to reduced bets on a March rate cut. Consequently, U.S. bond yields have continued to rise, and stocks have slumped, indicating a more cautious approach from investors as they reassess the market’s trajectory.

Friday Economic Events:
Employment Report 8:30am ET – High Volatility Expected
Factory Orders 10:00am ET
ISM Services PMI 10:00am ET – High Volatility Expected
Baker Hughes Rig Count 1:00pm ET

Fed Speaker Scheduled:
Thomas Barkin 1:30pm ET

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