The Week That Was
The momentum from the AI-driven market rally waned during Friday's afternoon session. The S&P 500 and the Dow Jones Industrial Average eked out modest gains, while the Nasdaq Composite dipped into the red, reversing from earlier record highs.
This shift comes after Wall Street's robust gains in the previous session, fueled by Nvidia's impressive quarterly earnings. The semiconductor giant's stock soared, pushing its market valuation over the $2 trillion mark, after reaching a new peak at $805.55. Carvana also made headlines with a 31.44% jump in its stock price, following a report of a smaller loss in the fourth quarter than expected.
On the flip side, Booking Holdings saw its shares tumble over 10% despite earnings that beat forecasts, as the company warned that geopolitical tensions in the Middle East might affect its upcoming quarterly results.
Similarly, Warner Bros Discovery's shares declined by approximately 8% after the company reported disappointing revenue for the fourth quarter.
Over the week, the S&P 500 registered a 1.6% increase, the Dow Jones advanced by 1.2%, and the Nasdaq grew by 1.4%.
During Friday's trading session, the JSE All Share Index experienced fluctuations before ultimately closing slightly higher at 74 213, marking its highest level in more than two weeks.
This activity came as global traders paid close attention to recent cautious remarks made by US Federal Reserve officials.
On the home front, South Africa's Finance Minister, Enoch Godongwana, underscored last week that the nation's electricity crisis is the foremost barrier to economic expansion. He voiced concerns that persisting challenges within the transport and logistics sector might further hinder progress. Godongwana advocated for the introduction of private partnerships in both the electricity and logistics sectors as a strategy to mitigate these issues.
In terms of individual shares, Karoo and Spar recorded the most significant declines, dropping 5.1% and 4.2% respectively, while Picknpay and Bytes led the gains, with increases of 7.1% and 4.1%.
Over the week, the JSE saw an overall growth of 0.8%.
The Week Ahead
In the US, the focus of traders and investors is set to shift back to a packed economic agenda, coupled with a series of speeches from US Federal Reserve officials.
Upcoming key economic indicators include the PCE price indexes, personal income and spending, the ISM Manufacturing PMI, and orders for durable goods. Expectations are set for a 0.3% rise in PCE prices for January, a slight increase from December's 0.2% growth, with core prices projected to climb by 0.4%. The report is also anticipated to show a 0.3% increase in consumer spending and a 0.5% rise in income.
Moreover, the ISM Manufacturing index is expected to reflect ongoing contraction in the sector for February, and orders for durable goods are predicted to have fallen by 4.5% in January. Additionally, investors will pay close attention to the second estimate of the fourth-quarter GDP, as well as updates on new and pending home sales, Case-Shiller home prices, Chicago PMI, Dallas Fed Manufacturing Index, and preliminary figures on wholesale sales and the goods trade balance.
The US earnings season is nearing its conclusion, with companies like Workday, Lowe's, American Tower, AMC, HP, Salesforce, TJX Companies, and Dell on the docket to report.
In Europe, key reports on inflation and employment within the Eurozone are due. The Euro Area's annual inflation rate is expected to ease to 2.5% in February, with the core rate forecasted to fall to 2.9%, the lowest since February 2022.
In the UK, attention will centre on the Bank of England's monetary indicators, Nationwide housing prices, the CBI's distributive trades survey, and the final manufacturing PMI.
In Asia, the spotlight turns to China's PMI for February, offering the first glimpse into the economy's performance during the Lunar New Year holiday period, following Beijing's support measures.
Japan is poised to release new inflation data, expected to reveal a continued slowdown in consumer prices, alongside updates on consumer sentiment, industrial production, retail sales, housing starts, and unemployment rates. Meanwhile, India's focus will be on the second estimates for the current fiscal year's GDP growth.
Key Themes for the Week Ahead
US Inflation
The focus shifts back to inflation this week with the anticipated release of the Personal Consumption Expenditures (PCE) price data for January, expected on Thursday.
Recent data, including consumer and producer prices as well as employment figures, highlight the US economy's resilience amidst a prolonged phase of high interest rates.
This resilience has led investors to adjust their expectations for US Federal Reserve rate cuts to later in the year. Economists predict a 0.3% rise in January's PCE data, following a 0.2% increase the previous month.
A higher-than-expected inflation rate might cause the Fed to postpone rate cuts even further. Additionally, the economic agenda will cover various other indicators, including consumer confidence reports from notable sources.
US retail earnings
As earnings season draws to a close, key retail companies are set to release their financial results, offering valuable insights into consumer spending trends.
Notable reports expected include those from Lowe's, Macy’s Inc., TJX, and Best Buy. These reports come at a time when market attention is gradually shifting from corporate earnings to monetary policy prospects.
There is some optimism about achieving a "soft landing" for the economy, which could potentially facilitate an environment for interest rate reductions, benefitting the equity market overall.
Eurozone inflation
The Eurozone is on the verge of releasing crucial inflation data on Friday, marking the last update before the European Central Bank's meeting on 7 March. January saw a slight decrease in consumer price inflation, edging closer to the ECB's target of 2% after a significant spike in 2022.
Despite this progress, the ECB has maintained high interest rates, citing ongoing concerns over wage growth.
Bundesbank President Joachim Nagel emphasizes the importance of caution against premature rate cuts, especially before key wage data becomes available in the second quarter.
China PMIs
China is intensifying efforts to support its economic recovery, evident from significant measures such as the largest-ever cut in the benchmark mortgage rate and increased regulatory interventions to rejuvenate the equity market.
Upcoming PMI data will shed light on the effectiveness of these initiatives, with expectations set for the manufacturing sector to remain in contraction, while services sector activity is anticipated to stabilise.
Oil Prices
Oil prices saw a nearly 3% drop last Friday, culminating in a weekly decline, influenced by a statement from a US central bank official hinting at delayed interest rate cuts.
Both Brent and WTI crude experienced significant decreases over the last week. However, strong fuel demand indicators and supply concerns may contribute to a price rebound. Fed Governor Christopher Waller's comments about postponing rate cuts have implications for economic growth and oil demand, reflecting the broader market's sensitivity to inflationary pressures and their impact on energy consumption.
South Africa News
According to analysts, Finance Minister Enoch Godongwana's 2024 national budget proposal appears to be strategically crafted with the upcoming election in view. They suggest that the budget aims to bolster the ruling party's electoral prospects by enhancing social support programs and avoiding the introduction of new tax initiatives.
ANC President Cyril Ramaphosa has challenged the DA to disclose its cadre deployment records, following the governing party's compliance with a Constitutional Court directive. This order required the ANC to submit all documents related to its cadre deployment committee for the period of 2013 to 2021 to the opposition party. These records are of private meetings the ANC leaders held to decide on appointments of senior government officials as well as of members of boards and executives of state-owned entities.
In a groundbreaking development, South Africa's parliament has impeached a high-ranking judge due to misconduct. The investigation revealed that John Hlophe, the chief judge in Western Cape province, attempted to sway the opinions of justices at the nation's highest court regarding a case involving former President Jacob Zuma. In 2008, he approached two justices to ascertain their willingness to favour Mr. Zuma in a verdict related to a corruption case.
Economic Calendar
In the upcoming economic calendar for this week, several significant events are scheduled to take place.
source: investing.com
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