The Long and Short of it, week ending 02 Feb 2024
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A positive but somewhat volatile week with stock markets rising Monday, falling mid-week and then finishing higher. A no-news, momentum rally pushed prices higher Monday in front of a slew of earnings reports, the FOMC announcement and Friday’s payroll report. Markets stalled Tuesday and then dropped markedly Wednesday after Fed Chair Powell all but ruled out a March rate cut and as regional bank concerns re-emerged after New York Community Bank reported a Q4 loss. 10-year Treasury rates, down 10bps through Tuesday, fell another 11bps Wednesday, reacting both to regional bank concerns and to dovish Powell press conference comments supporting expectations of rate cuts this year. Markets rallied strongly Thursday, rising predominantly on the strength of tech stocks and then rallied again Friday on the heels of a surging META stock price and sharply higher AMZN stock price. Friday’s much stronger-than-expected payroll report showing much higher-than-expected jobs creations (as well sharply higher previous-month revisions) seemingly supported stock prices but drove 10-year Treasury yields significantly higher (up 14bps) on increased higher-rates-for-longer expectations. For the week, the S&P 500 Index rose 1.4% to 4,958.61, the Nasdaq Composite Index gained 1.1% to 15,628.95, the Dow Jones Industrial Average increased 1.4% to 38,654.62, the 10-year U.S. Treasury rate fell 12bp to 4.02% and the U.S. dollar (as measured by the ICE U.S. Dollar index – DXY) strengthened 0.5%.
European stock markets were unchanged to slightly lower, affected by mixed earnings reports, slowing inflation and Chinese and U.S. economic data. The STOXX 600 Index, unchanged on the week, moved slightly higher through mid-week on better-than-expected earnings reports, better-than-expected Spanish GDP growth and cooling German, French and euro zone inflation. Those gains were erased Thursday, however, by falling bank stock prices following a disappointing BNP Paribas earnings report. The FTSE 100 Index, down about ¼ percent on the week, only moved higher Tuesday, bolstered by sharply slowing retail price increases. Thursday’s as-expected BoE rate decision (unchanged) but hawkish comments indicating rate cuts required more evidence of slowing inflation, pressured stock prices lower. Friday’s much stronger-than-expected U.S. payroll report, pushing U.S. rates higher, seemingly tempered European stock markets with both the FTSE 100 and STOX 600 Indexes finishing the day practically unchanged. For the week the FTSE 100 Index decreased 0.3% to 7,615.54, the STOXX 600 Index was practically unchanged at 483.92, the 10-year Gilt rate fell 5bp to 3.92%, the 10-year Bund rate fell 7bps 2.23% and the British pound and the euro weakened 0.6%, both versus the U.S. dollar.
Top performing ETPs over the week
| . | 3x Long ETPs | 3x Short ETPs | ||
|---|---|---|---|---|
| UK | 3x Long Diageo (3LDO) | +9.1% | 3x Short Vodafone (3SVO) | +9.2% |
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The Long and Short of it, week ending 02 Feb 2024
