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Major US indices end 9-week win streak

The S&P 500 closed Friday slightly higher, but all three major indices ended a nine-week winning streak due to a better-than-expected jobs report.

The broader S&P 500 index increased by 0.18 per cent to finish at 4,697.24.
The Nasdaq Composite edged up 0.09 per cent to end at 14,524.07.
The Dow Jones Industrial Average inched higher by 25.77 points, or 0.07 per cent, settling at 37,466.11.

This marked the first negative week in 10 for all three major indices. The Nasdaq experienced the most significant drop at 3.25 per cent, its worst weekly performance since September. The S&P 500 and Dow declined by 1.52 per cent and 0.59 per cent, respectively.

On Friday, stock prices fluctuated as traders evaluated economic data to gauge when the Federal Reserve might begin cutting interest rates. The US economy added more jobs than expected in December, with nonfarm payrolls growing by 216,000, surpassing the Dow Jones consensus estimate of 170,000. The unemployment rate remained steady at 3.7 per cent, indicating continued labour market strength.

This report caused Treasury yields to rise, with the benchmark 10-year rate peaking at 4.103 per cent. A robust job market might delay the Fed’s anticipated rate cuts, which traders had expected as early as March, with as many as six rate cuts in 2024. These expectations may need to be revised.

While the December ISM services index suggested overall economic expansion, it fell to 50.6 per cent, almost two percentage points below the Dow Jones consensus estimate of 52.5 per cent and November’s 52.7 per cent. A reading above 50 per cent indicates economic growth.

The stock market rallied at the end of 2023, as traders anticipated a shift to easier monetary policy by the Fed. The S&P 500’s lengthy winning streak marked its longest in nearly two decades, resulting in a 24 per cent gain for the year.

In the new year, the market faces headwinds, including the cooling of large-cap tech stocks like Apple, which received downgrades from two research firms this week, leading to a 5.9 per cent decline.

Overall, most sectors closed higher on Friday. Financials was the best performer, whilst Consumer Staples was the worst.

This week, the focus is on US December CPI data and the beginning of Q4 earnings season for US companies. Analysts anticipate strong performance among S&P 500 companies, driven by factors such as robust economic growth, lower interest rates, and a weaker US dollar. Federal Reserve officials are expected to remain cautious about rate cuts.

In commodity-related news, oil prices saw an increase over the week due to concerns about a potential escalation in the Israel-Hamas conflict. West Texas Intermediate settled at $73.81 per barrel, marking a 3 per cent increase, while Brent settled at $78.76 per barrel, showing a 2.23 per cent increase.

The Chilean government has launched a public-private partnership aimed at extending the lifespan of the Atacama salt flats, which are known as the world’s most affordable source of lithium, by an additional 30 years. This partnership involves a 50-50 joint venture between the local mining company Sociedad Química y Minera and the state copper company Codelco. The goal is to ensure continuous production of a significant portion of the global lithium supply, crucial for electric vehicle batteries, until 2060. This extends the previous expiration date of 2030.

Lithium prices are expected to continue declining due to increased supplies, subdued demand in China, and a sluggish American electric vehicle market. Australia’s Department of Industry, Science, and Resources predicts that the spot price of spodumene will drop to $2,200 per tonne by 2025 from an estimated average of $3,840 per tonne in 2023. Additionally, the spot price of lithium hydroxide may decline to approximately $30,000 per tonne in 2025 from an estimated average of $52,450 per tonne in 2023. These price trends could potentially impact investments in battery metal mining projects that are crucial for the transition to cleaner energy.

Futures

The SPI futures are pointing to a 0.04 per cent fall.

Currency

One Australian dollar at 7:30 AM was buying 67.25 US cents.

Commodities

Gold has lost 0.01 per cent. Silver has gained 0.55 per cent. Copper has lost 0.99 per cent. Oil has gained 2.24 per cent.

Figures around the globe

European markets closed lower on Friday. London’s FTSE lost 0.43 per cent, Frankfurt lost 0.14 per cent, and Paris closed 0.4 per cent lower.

Turning to Asian markets, Tokyo’s Nikkei gained 0.27 per cent, Hong Kong’s Hang Seng lost 0.66 per cent and China’s Shanghai Composite closed 0.85 per cent lower.

On Friday, the Australian share market closed 0.07 per cent lower at 7,489.07.

Ex-dividends

One company is going ex-dividend. Turners Automotive (ASX:TRA) is paying 5.52 cents 85 per cent franked.

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.

Disclaimer

The views, opinions or recommendations of the commentators in this presentation are solely those of the author and do not in any way reflect the views, opinions, recommendations, of Sequoia Financial Group Limited ABN 90 091 744 884 and its related bodies corporate (“SEQ”). SEQ makes no representation or warranty with respect to the accuracy, completeness or currency of the content. Any prices published are accurate subject to the time of filming and shouldn’t be relied upon to make a financial decision. Commentators may hold positions in stocks mentioned and companies may pay FNN to produce the content at times. The content is for educational purposes only and does not constitute financial advice. Independent advice should be obtained from an Australian Financial Services Licensee before making investment decisions. To the extent permitted by law, SEQ excludes all liability for any loss or damage arising in any way including by way of negligence.