The Big 40! – Monday Morning Market Memo – May 20, 2024

The Big 40! – Monday Morning Market Memo – May 20, 2024

The “Big 40” we are writing about here does not have anything to do with a birthday.  Rather, we are referring to the venerable Dow Jones Industrial Average closing above 40,000 for the first time ever and notching its fifth consecutive weekly gain in the process, rising 1.2% to 40,004 last week.  The other major averages were winners as well – the Standard & Poor’s 500 Index gained 1.5% to 5,303 while the NASDAQ Composite added 2.1% to 16,686 – with each index locking up a fourth straight week of gains.

Factors behind last week’s stock market rally include an overall strong corporate earnings season along with softer inflation and other economic data, which has bolstered market expectations for an interest rate cut by the Federal Reserve this year.  The Consumer Price Index reading released last week showed inflation easing a bit, while retail sales also came in softer-than-expected.  These datapoints have investors betting the Fed will now have the clearance to cut interest rates at some point in 2024.  Probabilities are now approximately 63% the Fed will deliver their first rate cut in September, according to the CME FedWatch Tool.

In addition to hopes for an interest rate cut, strong earnings have contributed to the market rally.  For the first quarter of 2024, with 93% of S&P 500 companies having reported actual results, 78% of S&P 500 companies have reported a positive EPS (Earnings Per Share) surprise, which is above both the 5-year and 10-year averages – according to FactSet.

Looking to earnings during the week ahead, its retail week as companies including Lowe’sTargetTJX CompaniesAutoZoneMacy’s, and BJ’s Wholesale Club are scheduled to report.  The most anticipated report of the week, however, is from NVDIA, which has become the poster child for Artificial Intelligence and is scheduled to announce results on Wednesday.

As always, please contact us if you have any questions, or if you would like to schedule a meeting.

All the best – Southport Station Financial Management, LLC