May 13, 2024

The market continued its latest winning streak on Friday, as the Dow ended higher for the eighth straight day and up for four straight weeks. It finished with a gain of 125 to 39,512 led by advances in AXP, CAT, MCD and UNH and haven’t we seen the first two on the leaderboard list consistently on these higher sessions.

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The S&P gained for the third straight week with an 8 point advance led by NVDA which seems to be churning around current levels ahead of its earnings report late next week, in addition to financials and industrials.

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The regular Nasdaq ended lower by 5 points while the Nasdaq 100 which is more heavily weighted toward technology, actually ended with a 48 point gain led by that NVDA advance in addition to MSFT plus AVGO.

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The Russell 2000 Index of small stocks ended down by 13 to 2060 while the VIX continues to slide, now down to 12.55 as this item has come all the way down from its resistance near 20 right close to its support level at 12.40 and if it can break through that, then a new higher leg for equities can well be underway. If it cannot go below, then equities could be subject to some sort of pullback.

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The indices had been much higher to start when the release of the mid-month U. of Michigan Consumer Sentiment Survey showed a large decline down to 67.4 which was the lowest since last October and a higher inflation rate than expected.

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The S&P has now climbed back to within 0.6% of its record on revived hopes that the Federal Reserve may deliver cuts to interest rates this year. A flood of stronger-than-expected reports on profits from big U.S. companies has also helped support the market.

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GEN jumped by 15% after reporting better profit for the first three months of 2024 than analysts expected. The cyber safety company, whose brands include Norton and LifeLock, also authorized a program to buy back up to $3 billion of its stock. It joined a lengthening list of companies announcing big such programs, which helps goose per-share earnings for investors.

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NVAX nearly doubled and shot 98% higher after announcing a deal with Sanofi that could be worth more than $1.2 billion. The agreement includes a license to co-commercialize Novavax’s COVID-19 vaccine worldwide, with some exceptions. The company also reported a slightly smaller loss for the latest quarter than analysts expected.

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They helped offset a drop of 11% for AKAM which topped expectations for profit but fell short for revenue. The cloud-computing, security and content delivery company also gave some financial forecasts for the upcoming year that fell short of analysts’ expectations.

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It said the strengthening of the U.S. dollar’s value against other currencies is slicing into its business, along with slowing traffic growth across the industry. That helped overshadow its own announcement of a program to buy back up to $2 billion of its stock.

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In the bond market, Treasury yields rose following the discouraging preliminary report from the University of Michigan.

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It suggested sentiment among U.S. consumers is weakening by much more than economists expected, and the drop was large enough to be statistically significant and brings sentiment to its lowest reading in about six months.

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Potentially even more discouraging is that U.S. consumers were forecasting inflation of 3.5% in the upcoming year, up from their forecast of 3.2% a month earlier. If such expectations spiral higher, the fear is that it could lead to a vicious cycle that worsens inflation.

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It highlights how some companies have recently been describing increasing struggles among their customers, particularly their lower income ones.

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The yield on the 10-year Treasury rose to 4.50% from 4.46% late Thursday. But the movement was still relatively modest compared with its drop from 4.70% late last month.

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Markets may remain on hold until Wednesday’s highly anticipated April C.P.I. report as traders are still largely penciling in one or two cuts to interest rates by the Federal Reserve this year, according to data from CME Group. Right now, the market is in a good mood thanks to a decent earnings season and a Fed that has a high bar to hiking, but that mood can change quickly.

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Last week, Fed Chair Powell helped pull yields lower after saying the central bank remains closer to cutting its main interest rate than hiking it, despite a string of high readings on inflation this year. The Fed has been keeping its main interest rate at the highest level in more than two decades in hopes of getting high inflation fully under control.

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A cooler than expected recent jobs report at the end of last week, meanwhile, suggested the economy could pull off the tricky balancing act of staying solid enough to avoid a bad recession but not so strong that it worsens inflation.

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In stock markets abroad, London’s FTSE 100 rose 0.6% after the government reported the U.K. economy bounced back to growth at the start of the year. The performance was better than expected, and it snapped two straight quarters where the economy shrank.

In Japan, Tokyo’s Nikkei 225 rose 0.4% after a report showed strong auto exports whittled down the nation’s trade deficit and it racked up solid returns on overseas investments.

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First-quarter earnings season is winding down with the following reporting this week: Tuesday – Dow component HD and JACK; Wednesday – Dow component CSCO; Thursday – Dow component WMT plus AMAT, DE, TTWO, UA.

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Economic reports will be important with: Tuesday – April P.P.I.; Wednesday – April C.P.I., April retail sales; Thursday – weekly jobless claims, April housing starts, April industrial production and capacity utilization; Friday – April L.E.I.

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