Market Milestone: S&P 500 Tops 5,000
February 9, 2024
For the first time since its inception in 1923, the S&P 500 closed above the 5,000 level on Friday. The index had flirted with the milestone on Thursday, hitting an intraday high of 5,000.40 before ending the trading session slightly below the level. The record initially looked like it wouldn’t happen this week following a sharp sell-off on Monday driven by Federal Chair Jerome Powell’s comments on “60 Minutes”. In his televised interview, Powell not only cast doubt on a March rate cut but also backed December’s “dot plot” forecast for just three rate hikes this year. That is well below the six cuts anticipated by the market. He also reiterated the central bank’s commitment to keeping rates elevated until it sees more evidence inflation will continue to move towards its 2.00% target level. A number of Fed officials backed up the chairman’s comments this week, all pushing back on the market’s narrative for a quick rate pivot. The news not only hit stocks but also bonds. Treasury yields closed at 4.18% on Friday, a sharp spike from last week’s 3.81%. Despite the Fed’s hawkishness, optimism returned in the latter half of the week driven by solid economic data and earnings. For the week, the S&P 500 finished up 1.37% to a new record high of 5,026.61.
Service Demand Rebounds
The economy showed more signs of growing Q1 momentum as the ISM Services Index rose nearly three points from December to 53.4 in January. That was above analysts’ forecasts of 52. Numbers above 50 indicate expansion while numbers below signal contraction. The topline figure was driven by a sharp gain in employment, which came out of contraction territory and rose to 50.5 – a gain of 6.7 points. New export orders also rose strongly, up 5.7 points to 56.1. Throwing yet another wrench in the market’s bet for a Fed pivot, the prices index surged 7.3 points to 64. ISM survey respondents cited higher costs for transportation due to impacts of the Suez Canal driven by unrest in the Red Sea and issues at the Panama Canal. In order to avoid the Red Sea, ships are now taking a longer route around Africa, which is adding about two and a half weeks for transport. Meanwhile, the Panama Canal has been gripped by drought-like conditions which has forced the canal to restrict the number of ships going through it due to extremely low water levels, adding to the backlog of global shipments. Adding to the price gains, businesses reported rising wage costs as they seek to retain employees in what still remains a tight labor market. The price gauge bears watching as it will be a major factor in the Fed’s timing to lower rates
U.S. Trade Boosts GDP
U.S. exporters ended the year on a high note as exports rose 1.50% to $258.2 billion driven by higher demand for industrial supplies and materials, consumer goods, and foods, feeds, and beverages. Meanwhile, imports rose 1.30% to $320.4 billion. A rise in consumer goods (pharmaceuticals, cell phones, and other household goods) and industrial supplies drove imports higher during the month. December’s export growth helped push the U.S. trade deficit to its lowest level in three years and added to the economy’s strong 2023 performance. In another milestone, December’s trade report showed Mexico taking China’s crown as the U.S.’s largest bilateral trading partner for the calendar year. The U.S. imported nearly $476 billion from Mexico and exported roughly $323 billion.
Final Thoughts
Solid economic news and earnings delivered the S&P 500 a new record this week. In addition to closing above 5,000 for the first time in history, Friday also marks the market’s fifth consecutive week of gains. While the 5,000 level is entirely meaningless in and of itself on a fundamental basis, round numbers tend to serve some technical importance by acting as either a support or resistance level. The case for 5,000 as a support level is based on economic momentum – a strong labor market, strong consumer spending, improving inflation, anticipated rate cuts, and $6 trillion dollars sitting in money markets that will seek a new home once rates start to fall. On the resistance side, you’ve mostly got uncertainty over the number and timing of the Fed’s rate cuts. The positives outweigh the negatives, and with the fanfare over the S&P’s record-breaking run and investors’ fear of missing out (FOMO), the wind is to the back of the market. The S&P 500 has climbed over 20% over the last three months and notched gains in 14 of the last 15 weeks. The market is fully valued but not overly so, and with earnings forecasted to grow by double digits in 2024, equities will likely remain the place to be for investors.
The Week Ahead
Markets will be closed on Monday, February 19th for Presidents’ Day. Week in Review will also pause in observance of the holiday. Our next edition arrives on February 23rd with the latest S&P Global PMI and existing home sales numbers.
Super Bowl, Super Bets
Nearly 68 million American adults, or about one in four, plan to place a bet on this weekend’s Super Bowl, setting a record by a wide margin according to the American Gaming Association. The association released its estimate earlier this week, and it includes bets placed with both legal betting outlets and illegal ones, such as through bookies and online bets in other countries. Sports betting is legal in 38 states plus Washington, D.C. Betting on the big game is projected to be 35% higher than last year, which was also a record year for Super Bowl bets. An estimated $24.1 billion will be wagered, which is a $16 billion increase over 2023. The Kansas City Chiefs, the defending Super Bowl champion, will play the San Francisco 49ers in Las Vegas at Allegiant Stadium. The game is expected to draw more than 200 million television viewers on Sunday.
Because the Super Bowl is one of the most-watched sporting events worldwide and has become such a cultural phenomenon, it attracts a high level of betting interest and a range of betting options, even for those who are not die-hard sports fans. Bets can be placed on various aspects of the game, such as who will win (called a moneyline bet), the point spread, the total points scored (either over or under a predetermined number of points), or specific events within the game (known as prop bets).
A Super Bowl prop bet, short for proposition bet, is a wager placed on outcomes that may or may not affect the game’s final score or result. These bets can range from predicting the coin toss, the length of the national anthem performance, the first player to score a touchdown, or the color of the Gatorade shower at the end of the game. Prop bets can add an extra layer of excitement to the Super Bowl and engage viewers who may not typically follow football. No sports knowledge is required. Some of these bets are often referred to as “novelty props” or “exotic props.”
Below are a few prop bets for Sunday’s game. It might be wise to set some ground rules if you plan to share these with friends and family, such as no googling, no changing your answers, and no crying over incorrect guesses. Also, remember these are just for fun.
1. Which team will win the coin toss?
2. Will the coin land on heads or tails?
3. What color of Gatorade will be dumped on the winning team’s coach?
4. How long will the National Anthem last from the first note to the end of the final note (closest without going over)?
5. What will be the length of the word “brave” in the National Anthem?
6. Will any player or coach cry during the National Anthem?
7. Will viewers see a dog or a horse first in the Super Bowl ads?
8. How many commercials will feature animals during the game?
9. Which coach will be seen on camera first, San Francisco 49ers Coach Kyle Shanahan or Kansas City Chiefs Coach Andy Reid?
10. How many times will the announcers say “Super Bowl” during the broadcast?
11. Which team will be the first to call a time out?
12. Which player will score the first touchdown?
13. How many touchdowns will there be during the game?
14. What will be the celebration style of the first player to score a touchdown (dance, spike the ball, etc.)?
15. How many times will Taylor Swift be shown live during the game?
16. Which celebrity will be shown most frequently in the crowd during the game?
17. Which team will be the first to attempt a coach’s challenge?
18. How many high-fives will players exchange during the game?
19. How many times will the chains be used for measurement? For non-football fans, when officials are uncertain whether a team has advanced enough yards, they will use a set of metal poles and chains to achieve a fair and accurate measurement.
20. How many penalties will there be in the game?
21. How long will the half-time singer’s first song last?
22. Will any of the half-time show’s performers be suspended by wires?
23. Will either of the teams score during the last two minutes of the first half?
24. Will either of the teams score during the last two minutes of the fourth quarter?
25. Who will win the game?