Broker Check

Market Recap

February 01, 2024

Despite a selloff yesterday afternoon, markets overall showed strong growth for the second half of the month. In fact, the S&P 500 reached another record high last week, topping the previous week’s record close. The second half of January also saw a new record close for the Dow Jones Industrial Average (the Dow). Fueling growth was a surprisingly strong economy and more good news on inflation.

Fourth quarter Gross Domestic Product (GDP) rates were released last week. Once again the strength of the economy surprised economists, showing a quarterly growth rate of 3.3%. While this was a slowdown from third quarter’s pace of 4.9%, the overall GDP reading for 2023 sat at a strong 3.1%.1 Continued strong economic data helps ease concerns over a recession.

Inflation also continues to moderate. The Personal Consumption Expenditures Index (the Federal Reserve’s preferred measure of inflation) posted a modest increase of 0.2% for the month of December. On an annual basis, 2023 inflation rose 2.9% -- far below 2022’s level and still higher than, but closer to, the Fed’s target rate of 2%.2

The Fed concluded their first meeting of 2024 yesterday and made the widely anticipated move of holding interest rates steady. It was comments made by Fed Chairman, Jerome Powell, at the conclusion of the meeting that shook up investors. Chairman Powell acknowledged that while inflation is headed in the right direction, it is still too high. The Fed wants to see more positive inflation data before considering rate cuts. Most striking were comments that essentially ruled out a March rate cut.3  Prior to today’s comments a March rate cut was considered likely; with that rate cut essentially ruled out markets headed into a selloff, with the Dow down 0.82%, the S&P 500 down 1.61%, and the NASDAQ Composite Index (NASDAQ) down 2.23%.

Reviewing returns for the second half of January, the major markets all posted solid returns. As of market close on January 31st, the Dow rose 557 points (1.48%), the S&P 500 grew 62 points (1.29%) and the NASDAQ gained 191 points (1.28%). 

1,2www.jhinvestments.com “Weekly Market Recap; Week ended January 26” January 31, 2024

3www.investors.com “Stock Market Sells Off After Powell Talks Down March Rate Cut; Fed Holds Rates Steady” January 29, 2024

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