The stock market has been on a wild ride so far in 2024, and this week could see more sharp ups and downs.
Last week, major indexes like the S&P 500, Dow and Nasdaq-100 finished at record highs on Thursday and Friday, capping off the best two-day stretch for stocks in two years. But the path to those gains wasn’t smooth, with stocks swinging wildly day-to-day amid concerns over inflation, interest rates and the health of the economy.
This week brings more potential for volatility, with major corporate earnings reports, economic data and a looming Federal Reserve meeting on the horizon. Here’s what to watch for that could move markets in the days ahead:
All Eyes on Tesla Electric vehicle maker Tesla reports fourth quarter earnings after the bell on Wednesday. Investors will be listening closely for any surprises or changes to the company’s 2024 outlook.
Tesla already pre-announced stronger-than-expected vehicle deliveries for the fourth quarter. But worries have been growing about demand for EVs going forward, with Tesla stock down 15% in the early weeks of 2024 even as the broader market rallied. Rental car company Hertz also just cancelled orders for tens of thousands of Tesla vehicles due to rising maintenance costs, sparking more doubts.
Beyond the numbers, there’s sure to be a sideshow surrounding CEO Elon Musk, who recently demanded he be allowed to boost his ownership stake to 25% to prevent any takeover threats as Tesla expands into areas like artificial intelligence. What gamesmanship Musk attempts during the earnings call could cause more stock gyrations.
Inflation Data Looms Large We’ll get a highly anticipated update on inflation when the Commerce Department releases its personal consumption expenditures (PCE) price index report on Friday morning.
The Fed monitors this inflation gauge closely, as its preferred benchmark over the more widely known consumer price index (CPI). The pace of price increases has been steadily slowing in recent months, but still remains well above the Fed’s 2% target.
If the latest PCE reading shows a further cooling of inflation when it’s released Friday, it could strengthen the case for the Fed to slow its pace of interest rate hikes at its next policy meeting. And that prospect of less aggressive Fed tightening would likely boost stocks.
All Eyes on the Fed Speaking of the Fed, central bank officials enter their pre-meeting blackout period this Saturday. That means we won’t hear any more speeches or interviews from Fed members until after their Jan. 31-Feb. 1 policy meeting.
The betting right now is that the Fed will raise its benchmark interest rate by 25 basis points at this meeting, down from the 50 basis point hikes seen for much of 2022. But continued improvements on the inflation front could have some officials OPEN to pause rate hikes soon to assess the impact on the economy.
With the Fed now on radio silence, interest rate sensitive sectors like technology and growth stocks could see renewed volatility this week based on any news around inflation or economic data.
Mega-Cap Tech Earnings Flood Earnings season also continues at full throttle, with a slew of Big Tech names reporting. Microsoft, Tesla and IBM report this week, while Apple, Alphabet, Amazon and Meta Platforms are on deck next week.
With sky-high expectations already priced in for these tech titans after last year’s steep sell-off, there’s risk of more downside if they disappoint on earnings, revenue or guidance. On the flipside, an upside surprise – or even just meeting expectations – could give beaten-down shares of these tech mega caps a needed jolt higher.
Plenty of Landmines Remain Looking beyond this week, there’s still tremendous uncertainty about where stocks go from here after last year’s rout.
While corporate profits are expected to grow at a slower pace, they are still seen rising broadly in 2023. That could continue to provide positive momentum for stocks.
But lingering concerns around still-high inflation, a potential recession and further interest rate hikes from the Fed mean volatility is unlikely to go away anytime soon. And the recent rally has left valuations stretched once again for many parts of the market.
So while stocks could continue to see upswings on any incremental good news, risks remain tilted to the downside until more clarity arrives on the economic outlook. Expect more daily triple-digit swings for the major averages as investors grapple with this wall of worry.
For investors, it will be key to watch this incoming tide of economic data, Fed speak and corporate earnings to gauge where the economy and markets may head through the rest of 2023 and beyond. With so much uncertainty, having a diversified portfolio and keeping a long-term perspective will be key to navigating these choppy waters.
