A blockbuster earnings report from Nvidia Corporation pushed domestic large-cap equities higher for the week and catapulted the S&P 500®, Dow Jones Industrial Average® and Nasdaq-100® indices to all-time highs. While international equity markets also had positive returns for the week, they could not keep pace with the U.S. market, which has been up for 15 of the last 17 weeks.
Recent comments by various Federal Open Market Committee members that cautioned against premature rate reductions have pushed market expectations for cuts back to June 2024. This shift caused a decline in small-cap equities, specifically growth. As a result, the 10-year U.S. Treasury note also moved higher, climbing to 4.3%, a level not seen since November. This week we expect to gain further clarity on the path forward for rates as the latest reading of the Federal Reserve’s preferred inflation gauge, core personal consumption expenditures (PCE), sheds light on progress toward price stability.
Table of the Week
As fourth-quarter earnings season ends, the blended growth rate sits at 3.8%, more than double the 1.6% estimate at the start of the quarter.
Nvidia Corp.’s strong earnings release rallied the market to all-time highs as post-earnings surprise price performance for the broader market was below historical averages.
The 2023 full-year growth rate estimate of 1% falls to -4% when excluding the Magnificent 7, suggesting a less-than-stellar year for broad earnings growth.
Looking ahead, the first-quarter consensus estimate of 3.8% earnings growth has been slashed by more than half since year-end. However, full-year 2024 estimates have reset only modestly to just below 11%.