2024 | February 26

The Markets

Stocks Gain



A rally on Thursday helped U.S. stock indexes rebound from the previous week’s mostly negative results. The NASDAQ’s gain of more than 1% left that index four-tenths of a percentage point below its record closing high set on November 19, 2021. The S&P 500 and the Dow added to record highs they had set 11 days earlier. 

A stronger-than-expected earnings report from a major semiconductor company propelled U.S. indexes on Thursday to their biggest daily gains in a year. The NASDAQ’s nearly 3.0% surge was its biggest in 12 months, while the S&P 500’s 2.1% rise was its largest in 13 months.

An index of U.S. small-cap stocks slipped, becoming an outlier in an otherwise positive week for stocks. The Russell 2000 Index fell about 0.8% for the week, extending its run of year-to-date underperformance versus its large-cap peers.

It took more than three decades, but a Japanese stock market index finally set a record high on Thursday, climbing above its prior peak established on December 31, 1989. Japan’s equity market fell into a long slump in the early 1990s; it began its long rebound after hitting a low in early 2009. 

The current inversion of the yield curve deepened on Friday to its most extreme level year to date, as measured by the gap between the yields of 2- and 10-year U.S. Treasury bonds. The 2-year’s closing yield on Friday was 4.68% while the 10-year’s was 4.26%—maintaining an inversion, with short-term debt yielding more than long-term debt.

U.S. Federal Reserve officials expressed concern that recent progress in reducing inflation could be reversed by any strong growth in spending by consumers and hiring by businesses. Minutes of the Fed’s late January meeting that were released on Wednesday showed that some officials “noted the risk that progress toward price stability could stall.”

Oil prices fell about 2%, reversing course from the prior week’s gain, as the commodity traded in a fairly wide range. The price of U.S. crude climbed to nearly $80 per barrel on Tuesday before dropping as low as $76 the next day. On Friday, oil was trading slightly below $77.

Wednesday’s scheduled release of an updated U.S. GDP estimate will be among the week’s most closely watched economic reports. An initial estimate released in late January indicated that GDP expanded at an annual rate of 3.3% in last year’s fourth quarter, exceeding most economists’ expectations.

Source: John Hancock Investment Management

U.S. Life Expectancy

What Influences Stock Markets?

People use all kinds of information to make investment decisions. Benjamin Graham, who was Warren Buffett’s mentor, thought the proper approach was to evaluate company fundamentals. Graham wrote, “The stock investor is neither right or wrong because others agreed or disagreed with him; he is right because his facts and analysis are right.”

British economist John Maynard Keynes cautioned that how “others” think about stocks can have a significant effect on performance. Keynes is famous for saying, “Markets can remain irrational longer than you can remain solvent.”

Meme stocks, which are shares of companies that become popular through social media, demonstrated Keynes’ point. These companies often have poor fundamentals, but their stock prices soar because they are well-liked online. Social sentiment indicators use aggregated social media data to evaluate how people feel about companies. This data can be valuable to asset managers because digital influence can affect stock prices.

While tracking digital sentiment is relatively new, some surveys have measured how people feel about the economy and financial markets for decades. These include:

• The University of Michigan Index of Consumer Sentiment. The index ticked higher in February. Over the last three months, it has seen the sharpest gains in 30 years; however, consumer sentiment remains below the index’s long-term average, reported Christopher Rugaber of the Associated Press.

• The AAII Investor Sentiment Survey. Investors remained more bullish than usual last week with 44.3 percent saying they expected markets to move higher over the next six months. The historic average is 37.5 percent bullish.

Many factors affect the value of stocks and stock markets. “…Investor confidence is only one of many forces on the market. Stock prices are of course determined by supply and demand, and there are numerous factors that affect these, fundamental factors, legal, tax-related, demographic, technological, international, as well as other psychological factors related to attention, regret, anchoring, and availability,” explained the International Center for Finance at Yale University.

Stock market performance also can be affected by geopolitical factors, like conflict in Ukraine and the Middle East.

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Charles Schwab

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Emily Triano

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Maya Laws

Operations Associate

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