Market Data Point to a Sustained Rally
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What is the main topic discussed in this episode?
With your money briefing, I'm J.R. Whalen at The Wall Street Journal in New York.
What market data explains the S&P 500’s 11% gain so far this year?
The S&P 500 is up about 11% so far this year. That's sharply higher than its performance in the fourth quarter. Market data says it could go even higher. We'll break down the numbers in a moment. First, these money and market stories you should know. The housing market could be in for a strong spring season.
How could lower mortgage rates affect the housing market this spring?
That's because rates for home loans have fallen to their lowest level in more than a year. The 30-year fixed rate mortgage averaged 4.35 percent in the week of February 21st. That's the lowest since February of last year. And the 15-year adjustable rate mortgage averaged 3.78 percent. That's down three basis points from a week earlier. And the tight labor market with unemployment at 50-year lows could usher in higher inflation. That's the view of economists at Columbia University, the University of Chicago, and Deutsche Bank. They argue that as unemployment drops, it falls below a level thought to be consistent with stable prices. That's also known as the Phillips curve. And while that theory is held up in the past, the current economic climate presents a bit of a conundrum.
The Federal Reserve's view is that the unemployment rate, which stood at 4% in January, is below the level consistent with stable prices. But inflation hasn't accelerated much over the past two years, leading to some doubts over the strength of the relationship between prices and unemployment.
They say what goes up must come down. But how about after what goes down goes up and stays up? Well, that could apply to the stock market if we look at factors driving the current rally. And Wall Street Journal reporter Jessica Menton is here with some details for us. So, Jessica, after the market's steep decline of the fourth quarter, we've seen a roughly 11 percent run up by the S&P 500. We've got sort of a perfect storm in a good way involving trade and the Fed that could keep that rally going.
And looking ahead to this week, we're going to keep a lookout for Jerome Powell, the Federal Reserve chair. He has two days of testimony on Tuesday and Wednesday. And we also have the trade deadline between the U.S. and China on March 1st. So those are two big catalysts that investors are keeping on their radar to see more as far as looking at the health of the economy and then also as far as what's going on with the trade tensions between the U.S. and China.
What catalysts should investors watch this week (Powell testimony and trade deadline)?
And then also the market could get a shot in the arm on February 28th on Wednesday. We hear about fourth quarter GDP.
Yes. And that potentially is typically a more backward looking indicator because it is for the fourth quarter. But at the same time, that is supposed to be the big holiday quarter. Consumer spending is really what drives the economy. That's two thirds GDP. of growth right there. And so economists and investors are still going to hone in on it. But we have gotten some indicators since then to give them a bit clearer picture.
Which sectors are leading the current rally beyond FAANG stocks?
We've had retail sales numbers come in, not quite as strong as people were expecting. But still, the market didn't necessarily sell off on that data like it did in the fourth quarter when rallies weren't really holding. And we've seen the rallies really sustain this year. And I think that's a healthy signal.
You know, the so-called FAANG stocks, Facebook, Amazon, Apple, Netflix, and Google, they shot up sharply last year, then suffered broad declines in the fourth quarter.
Why do economists cite low unemployment as a risk for higher inflation?
Now they're recovering more moderately, and market analysts seem to like that.
They do, and the reason is because they're not the only ones that are leading the market right now. They are doing well, but what's really leading it is industrials, energy, technology and consumer discretionary. And then financials are a little bit further in that sort of same realm there. And because it's more broad based, that's a more healthy indication of the market. If you look towards last year and in 2020. 17 ahead of the fourth quarter. Of course, tech was the darling. But if you have only a certain amount of stocks that are really leading a rally, that's not healthy.
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Chapters
8 chapters
1
What is the main topic discussed in this episode?
0:05–0:09
2
What market data explains the S&P 500’s 11% gain so far this year?
0:09–0:26
3
How could lower mortgage rates affect the housing market this spring?
0:26–2:34
4
What catalysts should investors watch this week (Powell testimony and trade deadline)?
2:34–3:07
5
Which sectors are leading the current rally beyond FAANG stocks?
3:07–3:33
6
Why do economists cite low unemployment as a risk for higher inflation?
3:33–4:31
7
What is the NYSE advance-decline line and why is it a bullish signal?
4:31–5:58
8
What risks could still derail the rally despite positive market indicators?
5:58–6:44
Speakers
2 identifiedMore from WSJ Your Money Briefing
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