The Weekly Economic Update

Alexis DuffyNewsroom

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In this week’s recap: S&P 500 highs, Fed in focus

Presented by The PensionmarkMeridien Team, January 29, 2024

helping to buoy the gains. With so much going on, I’m sharing an overview of last week, plus what is on the horizon this week.

Tallying last week’s major stock market index performances, the S&P 500 increased by 1.06%1, the Nasdaq 100 rallied by 0.62%2, and the Dow Jones Industrial Average rose by 0.65%3.

Gross domestic product (GDP) measures the total amount of goods and services produced by a country, and it showed impressive gains in the fourth quarter of 2023. Data shows it grew at a whopping 3.3%4 annualized rate in Q4 2023 versus economist expectations for a 2% gain.

Data prints like these can be surprising — how can there be such a large disparity between expectations and the actual result? Consumer and government spending can influence the data to an extent, and perhaps we saw some of that in this data release.

Major stock market averages took the data in stride, finishing higher5 on Thursday after the data was released. Thursday’s close also marked the fifth straight record close for the S&P 500.

The rate of price increases cooled as 2023 came to a close, according to the most recent Core Personal Consumption Expenditures (PCE) data release.  

The Fed’s preferred inflation indicator showed prices up 0.2% in December and prices higher by 2.9%6 year-over-year. Dow Jones economists expected respective increases of 0.2% and 3%.

So, it is safe to say that prices have been increasing less aggressively overall, but we are still a long way from pre-2020 levels and the Fed’s target of 2%.

On top of all the economic data slated for release, we have the January Federal Open Market Committee meeting on January 30-31, with the big decision on interest rates and the subsequent commentary scheduled for 2:00 p.m. ET on the 31st.

As of last Friday’s market close, probabilities show a 96.7% chance of no change in interest rates and a 3.1% chance of a 25 basis point cut at the January 31st meeting, according to the CME FedWatch Tool7.

Investors will be scouring the written statement for clues about the future timing of Federal Reserve (Fed) interest rate policy changes.  

It is also a big week for earnings8, with juggernauts Microsoft and Alphabet set to report. AI commentary on the conference calls will undoubtedly be a focus of investors, with both companies at the forefront of this arena.

As of Friday, for Q4 2023 (with 25% of S&P 500 companies reporting actual results), of these companies, 69% have reported actual EPS above estimates, which is below the 5-year average of 77% and below the 10-year average of 74%, according to data9 from Factset.

Earnings season heats up10 this week and into February.

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Major U.S. equity indexes continued to be supported by solid economic data releases, and we get the double whammy of earnings season and the Fed this week.

Market narratives are dynamic, and many investors want to see an earnings and fundamentals-driven stock market (as opposed to such a Fed-driven and perhaps AI-driven one). That could be in the cards soon, once the picture of the Fed becomes clearer over the next few months. We will look for clues of such a shift throughout the remainder of the Q4 earnings season.

The January 31st Fed meeting has market expectations of producing no changes in interest rates, according to the CME FedWatch Tool11. Market watchers will be all ears for transparency and clues regarding the Fed’s mood going forward.

Earnings expectations are rather tempered overall as we approach the bulk of the season. However, expectations are high for AI-associated names, with a large concentration of the stock market’s gains being in information technology12.

If you’re currently exploring your options in the market, remember that I am here to help you make confident and clear decisions. Please don’t hesitate to reach out to me if you have questions or need assistance. I am always here as a resource for you. 

Don’t hesitate to reach out to us anytime with questions or concerns. 

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Pensionmark Financial Group, LLC (“Pensionmark”) is an investment adviser registered under the Investment Advisers Act of 1940. Pensionmark and WIA Holdings, LLC (“World”) are affiliated through common ownership with Pensionmark Securities, LLC. Securities offered through Pensionmark Securities, LLC (Member FINRA/SIPC).

Please consult your financial professional for additional information.

This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

1.            Trading View, January  28, 2024
2.            Trading View, January 28, 2024
3.            Trading View, January 28, 2024
4.            CNBC,  January 25, 2024
5.            Market Watch January 25, 2024
6.            CNBC, January 26, 2024
7.            CME Group,  January 29, 2024
8             TheStreet, January 27, 2024
9.            Factset, January 26, 2024
10.         Yahoo, January 2024
11.         CME Group, January 29, 2024
12.         Trading View, January 27, 2024 

Pensionmark Financial Group, LLC (“Pensionmark”) is an investment adviser registered under the Investment Advisers Act of 1940. Pensionmark and WIA Holdings, LLC (“World”) are affiliated through common ownership with Pensionmark Securities, LLC. Securities offered through Pensionmark Securities, LLC (Member FINRA/SIPC).