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March 2, 2024 Market Update

Another week, another record high for the U.S. stock market.  The S&P 500 Index rose 1.0% for the trading week at Friday’s close.  The gain lifted the benchmark yet again into uncharted upside terrain, which has been typical for much of the year so far.  The S&P 500, the Nasdaq, and the DJIA all closed out February with a fourth straight month of gains.

The 10-year Treasury yield fell to 4.19% on Friday, the lowest level in nearly three weeks.  A catalyst was Friday’s news that the U.S.A. manufacturing sector continued to contract in February, based on survey data that was weaker than expected.

Recent economic news, including inflation reports that have come in hotter than expected and payrolls data continuing to surprise to the upside, has raised doubts about whether the Federal Reserve will soon begin lowering interest rates.  Fed officials have expressed reservations about cutting rates too soon, and a growing economy could provide the Fed with the cover it needs to keep rates higher for longer.

On the other hand, weakening retail sales combined with record levels of credit card debt suggest that consumer spending may be about to slow.  In addition, consumer confidence retreated in February after a three-month gain, and orders for long-lasting U.S. manufactured goods fell more than expected in January.  So, it’s conceivable that the long-anticipated recession may finally be on the horizon.

Jim Picerno (The Milwaukee Company’s Director of Analytics) has developed a proprietary combination-forecasting model that takes a variety of economic indicators into consideration.  That model, which has been quite prescient so far, suggests America’s economy is still humming and the chances for interest rate cuts in the near term continue to fade.

Wall Street traders now see June as the most likely date for the first rate cut and expect just three interest rate cuts for 2024, as compared to the six rate cuts that they were betting on at the start of 2024.  

That’s all for now.  Have a great weekend and invest wisely my friends.