Market Insights

Sellers tried to hammer the stock market last week, but buyers came out of the woodwork instead.

The S&P 500 initially had bearish momentum, falling almost 1 percent in the first minute of trading on Monday, January 13. The move briefly erased the entire rally following November’s Presidential Election. But new lows didn’t follow. Prices stabilized and rallied into Friday’s close, ending the week up 2.9 percent.

Inflation and rising interest rates were the initial fears depressing sentiment. A survey from the American Association of Individual Investors (AAII) showed traders were the least bullish and the most bearish since November 2023.

The first shock came on Tuesday, when the producer price index (PPI) was lower than expected. The consumer price index (CPI) was also slightly under forecasts on Wednesday. Shelter prices, the largest category in the price index, had its smallest year-over-year increase since January 2022. It was a sudden and dramatic relief.

“I could certainly see rate cuts happening sooner than maybe markets are pricing in,” Federal Reserve governor Christopher Waller told CNBC on Thursday. “I’m optimistic this disinflation trend will continue and we’ll get back closer to 2 percent a little quicker than maybe others are thinking.” He added policymakers may lower rates before July.

Initial jobless claims also rose more than expected and retail sales missed estimates, further easing interest-rates worries. Other policymakers like Austan Goolsbee of the Chicago Fed and John Williams of the New York Fed made similar comments.

That kind of positive news reaction, on top of the negative sentiment, may suggest investors held significant amounts of cash. It could be another example of the adage that “bull markets climb a wall of worry.”

NAHB’s homebuilder sentiment index rose more than expected to a nine-month high. Housing starts, reported separately for December, rose more than expected to a 10-month high. Building permits and industrial production also surprised to the upside.

Broad Gains

Every major sector climbed last week, along with 88 percent of the S&P 500’s member stocks.

Energy led the advance as President Joe Biden tightened sanctions on Russian products. Oil-field servicer Schlumberger (SLB) also jumped after beating estimates, increasing its dividend and announcing a share buyback.

Financials had their biggest weekly gain in over a year after Citi (C), Goldman Sachs (GS), Morgan Stanley (MS) and Wells Fargo (WFC) reported better-than-expected quarterly results. Materials and industrials also bounced. Those three sectors had fallen sharply in December as bond yields rose.

United Rentals (URI) surged after agreeing to purchase rival H&E Equipment (HEES).

Chip stocks climbed after Taiwan Semiconductor (TSM) beat estimates and hiked its guidance for AI products. Intel (INTC) jumped amid reports it may be acquired by Elon Musk.

The three worst performers in the S&P 500 last week were health-care companies. Moderna (MRNA) cut its revenue outlook on weak vaccine demand. Eli Lilly (LLY) declined on a lack of apparent news. Charles River Laboratories (CRL) warned revenue wouldn’t grow and margins would narrow this year.

Apple (AAPL) bucked by the strength, sliding 2.9 percent, after Canalys said iPhones are loosing market dominance in China.

S&P 500, daily chart, with select patterns and indicators.

Charting the Market

The S&P 500 ended last week at its highest level since December 26 and returned above its 50-day moving average. That could suggest that its intermediate-term trend is improving after three months of sideways movement.

Moving average convergence/divergence (MACD) also turned positive after declining for five weeks.

Also see Market Trends: Are 3 Months of Consolidation Ending?

Some chart watchers may additionally think the index has broken a downtrend that began in mid-December. Traders may view the December 6 all-time high of 6,100 as an important level. The December 27 low of 5,933 may be considered support.

Apart from the S&P 500, last week saw the yield on the 10-year Treasury yield reach its highest level since November 2023. It then reversed and fell under last April’s peak. Remaining near these levels or dipping may support equities, given the importance of borrowing costs on valuations and the broader economy.

The Week Ahead

This week has only four sessions because markets are closed on Monday in memory of Martin Luther King Jr.

Attention is likely to focus on the White House, where Donald Trump may issue executive orders after being sworn in as President.

There are some noteworthy earnings. The economic data is mostly unimportant.

Today’s quarterly reports include Netflix (NFLX), 3M (MMM) and United Airlines (UAL).

Johnson & Johnson (JNJ), Halliburton (HAL) and Procter & Gamble (PG) issue results on Wednesday.

Thursday features initial jobless claims and crude-oil inventories. American Airlines (AAL) and Texas Instruments (TXN) report earnings.

Existing home sales are on Friday, along with numbers from Verizon Communications (VZ) and American Express (AXP).