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2023 4th Quarter Market Rally

Stocks killed it in 2023. The S&P 500 hasn’t seen a winning streak like this since 2004. But don’t pop the champagne yet. The first week of 2024 could be a reality check with the December jobs report due on Friday.

Also on the docket: Fed meeting notes, job openings, and updates on manufacturing and services.

On the corporate front, keep an eye on quarterly reports from Cal-Maine Foods, Walgreen Boots Alliance, and Constellation Brands. Tesla’s delivery numbers will also be under the microscope.

Markets are closed on New Year’s Day.

The two-month rally at the end of 2023 pushed major indexes to record highs. The Dow Jones added more than 4,500 points, breaking 37,000 for the first time. The S&P 500 is within reach of its record close of 4,796.56. The Nasdaq Composite had its best year since 2020.

The rally was fueled by hopes of a “soft landing” for the US economy, where inflation hits the Fed’s 2% target without causing a recession. The labor market has been stronger than expected, with low unemployment, few job openings, and minimal layoffs.

The December jobs report is expected to show 168,000 new jobs and a slight increase in unemployment to 3.8%. In November, the economy added 199,000 jobs and unemployment fell to 3.7%.

Investors are betting on a Fed rate cut in March, but economists aren’t so sure. Morgan Stanley’s Ellen Zentner thinks the labor market would need to cool down more for a March cut to happen. She believes we’d need to see less than 50,000 new jobs by February and low inflation.

Key Data Points from 2023 going into the new year 2024:

1. **S&P 500 Performance**: The S&P 500 index had a significant performance in 2023 with a total return of **26.58%**⁴². The index bounced back with an increase of about **24%**

2. **US Job Market**: The unemployment rate fell to **3.7%** in December 2023, and the labor force participation rate increased slightly to **62.8%**³. Job openings fell to **8.73 million**³.

3. **Federal Reserve Meeting Notes**: The Federal Reserve holds eight regularly scheduled meetings during the year⁵. The minutes of these meetings are released three weeks after the date of the policy decision⁵.

4. **US Manufacturing and Services Sectors**: The manufacturing sector is part of the goods-producing and industries services sector group²⁶. The US PMI® (Purchasing Managers’ IndexTM) is produced by S&P Global and is based on original survey data collected from a representative panel of around 800 companies based in the US manufacturing and service sectors[^30^].

5. **Company Quarterly Reports**:

    – Cal-Maine Foods reported quarterly net sales of **$997.5 million** and net income of **$323.2 million** in Q3 2023¹⁴.

    – Walgreen Boots Alliance reported a cash dividend of **$107.7 million**, or **$2.20 per share**, in Q3 2023¹⁵.

    – Constellation Brands delivered **422,875 vehicles** in Q1 2023³⁹.

    – Tesla reported **435,059 deliveries** for Q3 2023³⁷.

The S&P 500 Performance for 2023

Here is a table on S&P 500 performance for the past 10 years, based on the data from Yahoo Finance:

The table shows the S&P 500 index’s average closing price, year open, year high, year low, year close, and annual percentage change for each year from 2014 to 2023. The data is as of December 28, 2023. The S&P 500 index is a widely used benchmark for the performance of the U.S. stock market. It consists of 500 large-cap companies that represent various sectors of the economy.

The unemployment rate is the percentage of the labor force that is unemployed. The labor force participation rate is the percentage of the civilian noninstitutional population that is in the labor force. The job openings are the number of positions that are open (not filled) on the last business day of the month.

The PMI is a composite index based on five indicators: new orders, production, employment, supplier deliveries, and inventories. A PMI above 50 indicates expansion in the manufacturing sector, while a PMI below 50 indicates contraction.

Sources usedfor Market Analysis

Source for Jobs Report and PMI:

For the US job market, I used the data from the Bureau of Labor Statistics (BLS), which publishes monthly reports on employment, unemployment, hours, and earnings by industry sector⁶⁷⁸.

For the PMI, I used the data from the Institute for Supply Management (ISM), which produces a monthly survey of purchasing and supply executives in the manufacturing sector¹².

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  • (2) 2023 Employment & Earnings Online : U.S. Bureau of Labor Statistics. https://www.bls.gov/ces/data/employment-and-earnings/2023/home.htm.
  • (3) The Employment Situation – November 2023 – U.S. Bureau of Labor Statistics. https://www.bls.gov/news.release/pdf/empsit.pdf.
  • (4) United States Purchasing Managers index | Moody’s Analytics. https://www.economy.com/united-states/purchasing-managers-index.
  • (5) United States ISM Purchasing Managers Index (PMI) – TRADING ECONOMICS. https://tradingeconomics.com/united-states/business-confidence.
  • (6) Purchasing Managers’ Index™ (PMI®) | S&P Global. https://www.spglobal.com/marketintelligence/en/mi/products/pmi.html.
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  • (8) Global Purchasing Manager Index (PMI) of the industrial sector August 2023. https://www.statista.com/statistics/256701/global-purchasing-manager-index-pmi-of-the-industrial-sector/.
  • (9) Current Employment Statistics – CES (National) – U.S. Bureau of Labor …. https://www.bls.gov/ces/.

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