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New Month, New All-Time Highs: What's Next?

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Friday, March 1st, 2024

We’re at new all-time highs on the Nasdaq — the first since November of 2021 — which is part of a nearly year-long advancement based on the unveiling of A.I. technology on a practical basis, and led by the “Magnificent 7” stocks which benefited immediately on this new narrative. A few of these companies continue to reach new highs, like A.I. superstar NVIDIA (NVDA - Free Report) , while others, like Tesla (TSLA), have fallen off. But the Nasdaq has seen a wider distribution of bullish sentiment beyond the futuristic tech market, which has buoyed the index to where it is presently.

Pre-market futures this morning had been marginally positive, but have since slipped to marginally negative. With Q4 earnings largely in the books — and scores of shorts already having been squeezed, such as in the case of Beyond Meat (BYND - Free Report) earlier this week, which is up +40% in the past five trading days — the market will likely begin to become more reflective. We look to economic data points to help make sense of our current valuations, and trading behavior tends to follow suit.

Most of the activity today happens after the opening bell. S&P Manufacturing PMI and ISM Manufacturing, both for February, are expected to be close to the ever-important 50 level (above for the former, just below for the latter). Construction Spending for January is expected to come way down month over month on a seasonally adjusted basis. And Consumer Sentiment for February is expected to be relatively strong and consistent month over month.

Next week, we ramp up the economic significance of new reports with Jobs Week — private-sector employment from ADP (ADP - Free Report) , JOLTS data and non-farm payrolls from the U.S. government will all be on display, along with Weekly Jobless Claims. We’re still waiting for jobs numbers to come down; in this nearly complete Q4 earnings season, we’ve seen numerous “right-sizing” measures that are laying off thousands of workers overall. Eventually, these will come home to roost, but until they do, the Fed is confined by its own discipline to being “data dependent.”

So then, at or near new record highs, the question is now: what’s next? Clearly the market is shouldering its way through high interest rates and persistent inflation on things like supermarket goods. Much of the bullishness in the market depends on the lowering of interest rates in order to boost the economy further; whether the Fed finds it prudent to move is very much in question, and paradoxically, it remains the case that “bad news” on economic metrics will translate to “good news” in terms of interest rate levels.

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