Wall
Street
continues
to
climb
a
wall
of
worry
even
as
investors
deliberate
how
much
longer
equities
can
maintain
their
record
run.
The
stock
rally
continued
on
Friday
,
with
the
major
averages
each
advancing
more
than
1%
for
the
week,
buoyed
by
strong
results
from
Meta
and
Amazon,
as
well
as
a
slate
of
recent
reports
pointing
to
a
healthy
and
growing
U.S.
economy
.
But
questions
remain
for
investors
after
some
major
disappointments
in
an
intense
week
suggested
more
challenges
ahead.
Stocks
tumbled
Wednesday
after
Federal
Reserve
Chair
Jerome
Powell
said
a
March
rate
cut
is
unlikely
;
the
S
&
P
500
posted
its
worst
day
since
September
following
the
statement.
Apple
dropped
more
than
3%
this
week
after
reporting
lackluster
earnings,
weighing
on
the
Dow
Jones
Industrial
Average.
Elsewhere
in
corporate
earnings,
regional
banks
as
represented
by
the
SPDR
S
&
P
Regional
Banking
ETF
slid
7%
this
week
after
poor
results
from
New
York
Community
Bank
spurred
investor
fears
of
a
wider
contagion.
NYCB
shares
tumbled
42%
for
the
week.
“The
pain
trade
is
now
lower,
not
higher
from
here,”
Scott
Rubner,
managing
director
at
Goldman
Sachs,
wrote
in
a
Thursday
note.
“We
have
all-time
high
problems
for
the
US
equity
market
and
the
bar
is
simply
too
high
in
February.”
“‘If
we
go
down
a
little,
we
could
go
down
a
lot’
–
I
like
adding
February
equity
hedges
and
will
fade
this
green
pre-market
bounce,”
Rubner
added.
Signs
of
market
weakness
For
investors,
there
may
be
more
issues
in
the
market
going
forward
in
2024.
While
investors
came
into
the
year
anticipating
a
broadening
of
the
rally,
small
caps
have
thus
far
underperformed
to
start
the
year.
The
Russell
2000
is
down
by
more
than
3%
in
2024,
while
the
S
&
P
500
is
higher
by
more
than
3%.
Small-caps
are
likely
to
suffer
further
going
forward
from
the
impact
of
higher
for
longer
interest
rates.
Liz
Ann
Sonders,
chief
investment
strategist
at
Charles
Schwab,
told
CNBC’s
“Money
Movers”
on
Friday
that
zombie
companies,
to
which
the
Russell
2000
has
a
higher
exposure,
are
more
likely
to
crumble
now
that
the
prospect
of
lower
rates
have
moved
out
to
the
latter
part
of
the
year.
“We
can’t
look
at
sort
of
the
market
in
a
monolithic
way
anymore,”
Sonders
said.
“I
think
expectations
around
Fed
policy
moves
in
yields
seem
to
be
having,
probably
rightly
so,
a
disproportionate
impact
down
the
cap
spectrum.”
There
are
also
troubles
in
the
regional
banking
sector
after
NYCB,
which
took
over
the
failed
Signature
Bank
last
year
during
the
regional
banking
crisis,
reported
a
fourth-quarter
loss
that
shocked
investors.
“I
still
think
that
this
commercial
real
estate
problem
is
very
much
in
through
the
windshield,
not
the
rearview
mirror,
but
there’s
different
maturity
schedules,
there’s
different
exposures
within
commercial
real
estate,”
Sonders
said.”
“It’s
more
of
a
slow
motion
train
wreck
or
a
simmering
crisis
over
time,
as
opposed
to
sort
of
a
Lehman-esque
problem
where
there’s
going
to
be
some
announcement
and
the
bottom
falls
out.”
For
stock
pickers
looking
for
opportunities
in
the
wreckages,
she
advised
going
through
the
sector
with
a
fine-toothed
comb.
There’s
a
growing
disparity
in
mega-caps
as
well.
On
Friday,
Raymond
James
called
“MnM?
Microsoft,
Nvidia
&
*now*
Meta
Leading
in
AI
Era,”
the
hottest
new
portfolio
of
mega-cap
tech
stocks,
replacing
the
“Magnificent
Seven”
that
dominated
markets
so
completely
last
year.
Analyst
Josh
Beck
turned
especially
bullish
on
Meta
Platforms
after
the
social
media
company’s
strong
quarterly
results,
as
well
as
its
first
ever
dividend
payment.
However,
other
mega-cap
companies
such
as
Apple
have
taken
a
backseat,
with
the
iPhone
maker
reporting
a
13%
drop
in
sales
in
China.
Some
investors
also
continue
to
worry
about
a
recession
on
the
horizon
even
if
weakness
is
not
surfacing
immediately
in
the
economic
data.
James
McCann,
deputy
chief
economist
at
asset
manager
Abrdn,
said
he
expects
the
long
and
variable
lags
of
interest
rate
hikes
will
make
themselves
felt
in
the
broader
economy
eventually,
and
he
expects
a
hard
landing
in
the
second
half
of
the
year.
“If
we’re
right
that
a
recession,
that
a
mild
recession
is
coming,
then
I
think
there’s
a
decent
chance
that
equities
would
struggle
in
that
environment,”
McCann
said.
Stronger
economic
data
Regardless,
however,
Rhys
WIlliams,
portfolio
manager
at
Wayve
Capital
Management,
said
he
expects
markets
can
still
continue
churning
higher,
so
long
as
some
mega-cap
companies
continue
to
outperform.
On
Friday,
for
example,
the
sharp
gains
in
Amazon
and
Meta
helped
outweigh
any
muted
losses
in
Apple,
as
well
as
even
any
declines
in
their
respective
sectors.
“As
long
as
these
major
companies
that
are
both
large
and
defensive,
to
some
extent,
stay
positive,
the
whole
market
can
stay
positive.
You
don’t
really
need
to
broaden
out
for
the
whole
market
to
do
OK
as
defined
by
the
index,”
Williams
said.
“However,
it’s
not
going
to
be
the
runaway
market
that
November
and
December
was.”
More
broadly
speaking,
Art
Hogan,
chief
market
strategist
at
B.
Riley
Financial,
expects
that
stronger
economic
data
will
continue
to
be
a
positive
for
stocks,
with
first-quarter
GDP
tracking
at
a
4.2%
increase,
up
from
3%
previously,
according
to
the
Atlanta
Fed’s
GDPNow
tracker.
He
also
said
rate
cuts
will
boost
equities,
even
if
expectations
for
the
first
one
are
moved
out
past
March.
“We
no
longer
live
in
the
fear
that
any
economic
data
is
going
to
show
up
that
is
so
strong
that
it
forces
the
Fed
to
raise
rates
again.
They’re
at
the
high
point
of
the
tightening
cycle,”
Hogan
said.
“So,
while
we
can
quibble
over
the
‘when,’
we
know
‘what’
they’re
going
to
do
next,
and
that
is
a
tailwind.
That
is
a
headwind
from
’23
turned
into
a
tailwind
in
2024.”
Week
ahead
calendar:
Monday,
Feb.
5
9:45
a.m.
PMI
Composite
9:45
a.m.
Markit
PMI
Services
10
a.m.
ISM
Services
PMI
Earnings:
Simon
Property
Group
,
Estee
Lauder
Companies
,
Tyson
Foods
,
On
Semiconductor
,
McDonald’s
,
Caterpillar
Tuesday,
Feb.
6
Earnings:
Prudential
Financial
,
Chipotle
Mexican
Grill
,
Fortinet
,
Ford
Motor
,
Enphase
Energy
,
Eli
Lilly
,
GE
Healthcare
Technologies
Wednesday,
Feb.
7
8:30
a.m.
Trade
Balance
3
p.m.
Consumer
Credit
Earnings:
The
Walt
Disney
Co
.,
Wynn
Resorts
,
PayPal
,
Yum!
Brands
,
CVS
Health
,
Hilton
Worldwide
,
Uber
Technologies,
Costco
Wholesale
Thursday,
Feb.
8
8:30
a.m.
Continuing
Jobless
Claims
8:30
a.m.
Initial
Claims
10
a.m.
Wholesale
Inventories
Earnings:
Motorola
Solutions
,
Expedia
Group
,
Ralph
Lauren
,
T.
Rowe
Price
Group
,
ConocoPhillips
,
The
Hershey
Co.
,
Philip
Morris
International,
Tapestry
Friday,
Feb.
9
Earnings:
PepsiCo
