The Dividend Cafe - The DC Today - Thursday, January 25, 2024

Episode Date: January 25, 2024

Today's Post - https://bahnsen.co/48LulK1 An overall positive trading day without a lot of volatility behind what was a pretty decent batch of economic data. The Dow was up well over 200 points, and the S&P 500 notched a sixth day of gains. We had the first read on Q4 GDP come in significantly higher than expected at 3.3%, with the consumer powering almost two percent of it. Both durable goods orders and jobless claims came in just enough below expectations that bonds also rallied, with the 10 YR down six basis points. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Welcome to the DC Today, your daily market synopsis of the Dividend Cafe, brought to you every Monday through Thursday to bring you up-to-date information and perspective on financial markets. Hello, welcome to DC Today. It is Thursday afternoon, January 25th, and great to be with all of you as it always is, and nice to see a nice positive day in markets really across the board. I was a little concerned mid-morning that we were going to end up with a repeat of yesterday with markets kind of losing a little momentum.

But we ended up with 242 gain on the Dow, which is great. The S&P notched a sixth day of gains. And actually the bond market moved up in price, too, with yields moving lower by about six basis points. We've had earnings that have been coming out that have been kind of fueling markets, too. There was a particularly good print from Big Blue today that was nice and market moving. But we had quite a couple of different things in the economic calendar come out that I think was really what was behind some of the market movement. GDP, a preliminary version of GDP for fourth quarter, came out at 3.3%. And markets were expecting around 2% that I wrote about as of yesterday. So quite a bit better than expected.

The consumer drove the lion's share of it. It was about 1.9% of that number. So mostly consumer, but pretty broad based all in all. And that was definitely good news. And I think part of what moved stocks, and then you had some other figures like durable goods that were flat on the month when we expected to gain. And also jobless claims that came in a little bit higher than expected kind of balance out things a little bit. And that's why you saw the bond market actually rally with rates come down a little bit. So kind of a mixed bag in economic data, but kind of a perfect recipe for a good, nice market today. Volatility remains fairly low. VIX is around 13 or so, 13 and a half.

low. VIX is around 13 or so, 13 and a half. So I'll take these kind of days. We had energy up again today, which was nice. There was some weather-related production impairment, I think, is maybe part of that culprit, but energy was up another 2.8% on the day, which was nice. Oil traded up to $77 and change on WTI. So good news as the world's largest exporter of oil and liquefied natural gas. New home sales on the day were stronger than expected, which is nice to see too. I mean, rates have come down, borrowing costs have come down. And then like I've talked about on the new home sale side, those builders are able to subsidize interest rates and buy them down for borrowers. It ultimately is just baked into the price of the house, but psychologically, I think.

So when buying a new house, probably cares a little bit more about a lower 50 basis points on an interest rate for a 30-year commitment versus an incremental dollar amount difference in price, especially when inflation has been high. And so I think people's expectations of what they're paying for things are already higher. So that seems to be working on the homebuilder side. I think those stocks are probably a bit overdone here at this point. They've had a heck of a run and that's a separate subject, but some positive momentum inside of it there, which is good. The GDP number of 3.3, by the way, would put the year of 2023 without a revision. They're going to revise it at some point on the quarter. But if it was today, it would be a 2.5% growth of GDP over 2023. So for all those who said

that rates going up to 5% were assuredly going to cause a recession or a slowdown or some sort of sharp contraction. Nope. 2023 was just fine. And the economy far outperformed what pretty much any economist or pundit would have projected beginning of the year, which is good. Tomorrow, we have inflation data coming out with PCE, which will be heavily anticipated. I mean, the economic data that we've had this week has been largely very good. Markets have performed fine. Year to date, the Dow is up about a percent, roughly, on the year.

So for the month of January, we're looking pretty good. And then tomorrow with inflation, we're expecting PCE on the core number to be up about 0.2% for the month, which is a little bit more than November. But that would put the annual year-over-year number down to 3% from 3.2% on core. That's what the Fed pays attention to quite a bit. We've talked over and over again about what's embedded inside that number that might be flawed with shelter costs and things. But on headline, we're expecting an unchanged figure tomorrow at 2.6%. So in line, I suspect, obviously, if it's below or above those numbers, then you could get markets either fueled or upset about it. But all in all, a decent week so far. you know, either fueled or upset about it. But all in all, a decent week so far. We'll have Dividend Cafe with you, as always, tomorrow in your inbox on Friday. And if I don't speak to you,

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