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“Good publicity is preferable to bad, but from a bottom-line perspective, bad publicity is sometimes better than no publicity at all. Controversy, in short, sells.” – Donald Trump

Morning stock market summary

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A bunch of economic data just hit the tape and it was generally better than expected.  Personal Income was slightly better than expected (0.3% vs 0.2%) while Personal Spending was a little weaker (0.3% vs 0.2%).  On the inflation front, Core PCE came in lower than expected on both a month-over-month and year-over-year basis.  The m/m reading came in at 0.3% versus forecasts for an increase of 0.4% while the y/y reading was also a tenth lower than expected at 4.6%. In response, futures, which were already higher, added a little bit to their gains.

What an interesting quarter it’s been for the stock market.  While the S&P 500 is up 5.5%, the Russell 2000 is barely hanging on to gains, and the Dow is actually slightly lower.  These all pale in comparison to the Nasdaq which is up 14.8% and the Nasdaq 100 which is up an unbelievable 18.5%. If these gains hold through the end of today, Q1 will go down as the best quarter for the Nasdaq 100 since Q2 2020, and it will mark the 21st quarter in the Nasdaq 100’s history (since 1985) that the index was up at least 15%.

Of the 20 prior quarters where the Nasdaq 100 was up 15%+, its median performance in the following quarter was a gain of 6.1% with positive returns 65% of the time.  That compares to an average gain of 4.0% with positive returns 68.4% of the time in all quarters since 1985. When the 15%+ gain occurred in Q1, however, forward returns weren’t as positive.  In those six quarters, the median performance in Q2 was a decline of 1.2% with gains just half of the time while the median rest of year gain was 7.5% also with positive returns half of the time. Before reading too much into these numbers, though, we would caution that returns were all over the map.  In terms of the rest of year performance, 97 percentage points separate the best (50.4% in 1998) and worst performances (-46.8% in 2000).

Looking at the Nasdaq 100 ETF’s (QQQ) price chart shows an interesting picture depending on your perspective.  In the short run, QQQ broke above resistance this week and traded to its highest level since Powell’s Jackson Hole speech in late August.  It has also carved out what technicians would describe as a bullish cup and handle formation.

Longer-term, QQQ’s rally has taken it to levels that once acted as support back in the first half of 2021 and Q1 2022. Since that Q1 2022 period there have only been a handful of days that QQQ traded above these levels, and two other times it attempted to make a break of that level it immediately pulled back.

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