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“Even if you don’t have the authorities – and frankly I didn’t have the authorities for anything – if you take charge, people will follow.” – Hank Paulson

Morning stock market summary

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

Futures were little changed coming into the 8:30 data dump this morning, even as Ged Governor Waller implied that investors should hold their horses regarding rate cuts by saying he needed to see additional evidence of decelerating inflation before thinking about cutting rates.  This morning’s data was generally positive as jobless claims were pretty much right in line with forecasts, while GDP was revised higher.  Inflation data in the form of the GDP Price Index and the core PCE Price Index were either right in line or slightly better than expected. In response to all the reports, futures remain little changed although they may have seen a slightly positive bump.

It may be the last trading day before a long weekend, but one thing you may want to stick around to watch for is whether the S&P 500 can squeak by with a double-digit percentage gain for the first quarter. Through yesterday’s close, the S&P 500’s quarter-to-date gain was 10.04%, so any gain today will make it two straight quarters of double-digit percentage gains.  Any decline, however, of even more than a point in the S&P 500 will put the quarter just shy of a 10% gain.

Taking an optimistic approach, the table below shows the performance of the S&P 500 following every prior period where the S&P 500 was up at least 10% since WWII. For each period, we show the S&P 500’s performance following the end of the second double-digit percentage quarter. The following month tended to see some weakness with a median decline of 0.75% and gains just three out of seven times.  Three months later, returns shifted positive with a median gain of 1.67%, but none of the streaks extended to a third quarter of double-digit gains.  Six months later, performance was also positive with gains more than two-thirds of the time, and one year later, the S&P 500’s median gain was 9.55% with positive returns all but once. The only time the S&P 500 wasn’t up over the next year was following the occurrence in Q4 2010, and that decline was just 0.002%.

Whether the market finished up 10% or more for the quarter, barring a very bad day, it will be the fifth straight positive month for the S&P 500, but one area of the market that hasn’t contributed much to this month’s rally is the mag 7. Through yesterday’s close, two of the seven stocks in the group were down month to date, and five were underperforming the S&P 500. That’s been an uncommon trend since the bull market kicked off in late 2022. The last time the S&P 500 was up in a given month and five of the seven mag 7 stocks underperformed the index was in October 2022.

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