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Some investors may have hoped to spend more time thinking about subjects other than the Federal Reserve in 2024. That's proving difficult so far. The Fed on Wednesday published minutes from its last meeting in December that showed it to be a bit more tentative on rate cuts than many expected, even keeping higher rates on the table for the time being. “It was possible that the economy could evolve in a manner that would make further increases in the target rate appropriate,” the minutes said. “Several also observed that circumstances might warrant keeping the target range at its current value for longer than they currently anticipated.” That weighed on sentiment in stock trading on Wednesday, with losses steepening in the final minutes of the session. The Dow Jones Industrial Average declined 285 points, or 0.8%, the S&P 500 also dropped 0.8%, and the Nasdaq led losses with a 1.2% fall. The so-called "Magnificent Seven" turned in a second-straight lackluster performance, with six of them falling, led by a 4.0% decline in Tesla. Heard on the Street's Stephen Wilmot points out that Tesla shares now trade for 65 times projected earnings, compared to 20 times a year ago, and argues those forward estimates of earnings are likely to come down. Bond markets seemed to shrug off the Fed news, with rates actually falling slightly: The 10-year Treasury yield declined by 0.039 percentage point to 3.905% Still, Fed watching looks set to be Wall Street's primary pastime this year, as it was last year, at least until election jitters take over in the fall. Here’s what else Heard on the Street was watching:
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Welcome to the Neighborhood! Wall Street Designed It By Carol Ryan PHOTO: JOE RAEDLE/GETTY IMAGES Your new suburban rental has granite kitchen countertops, built to withstand even the most hard-wearing tenant. The neighbors next door have the exact same laundry machine. Welcome to the community where every detail has been designed to keep costs down for the Wall Street landlord. Big investors are bullish about America’s family homes. So bullish they are willing to build entire new neighborhoods as it becomes harder to buy houses from the usual channels. Interest rates are at multiyear highs and fewer homes are for sale as owners don’t want to give up their cheap mortgage rates. Homes are also eye-wateringly expensive. In October, prices hit a fresh record according to the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index. Read More
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Tech’s AI Hangover Might Just Be Getting Started By Dan Gallagher PHOTO: BLOOMBERG NEWS One thing already seems certain about 2024: AI is going to need to start showing the money. Whether it can is a whole other question. Excitement for generative artificial intelligence sparked by OpenAI’s chatbot was the dominant theme for investors in 2023. The Nasdaq Composite jumped 43% for the year—its second-best annual performance in 15 years. Meanwhile, technology and e-commerce companies on the S&P 500 averaged a gain of 57%, more than double the broad index’s overall performance for the year. Indexes tracking subsectors such as chips and software recorded their best annual gains since 2009, when the market was bouncing back from the global financial crisis. Read More
In Brief After more than doubling in 2023, Tesla's shares are expensive, even relative to analyst profit forecasts that probably need to be cut, writes Stephen Wilmot. Electricity and gas providers are encountering a pushback on rate increases, says Jinjoo Lee.
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