weekly market update 2/23/2024

Stocks felt a little tired entering this holiday shortened week, but Nvidia’s earnings results on Wednesday night was the shot in the arm investors needed and this impressive rally continued.  However, while enthusiasm around artificial intelligence continues to power indices higher, Thursday’s +2% rally for the S&P 500 was rather unusual.  Per data from SentimenTrader, over the past 60 years the index has risen 2% or more with less than 60% of New York Stock Exchange stocks advancing just three other times - 1987, 2008 and 2020.  Next week we receive what many believe is the Federal Reserve’s favorite inflation gauge, the personal consumption expenditure, or PCE, and if this historic rally is to continue, we likely need inflation to cooperate.

DOW JONES INDUSTRIAL AVERAGE SHAKE-UP

On Monday, Amazon will replace Walgreens Boots Alliance within the Dow Jones Industrial Average (DJIA) and officially become a blue-chip stock.  The change seems to continue an effort by the committee responsible for choosing the composition of the 30-stock index to pursue more growth-oriented companies.  One of the last swaps, for example, saw Exxon Mobil, the longest tenured DJIA component at the time, replaced with software titan Salesforce in August 2020.  Ironically, however, the committee’s attempt at adding more growth backfired (see chart below).  To be clear, we prefer Amazon to Walgreens, but it will be interesting to revisit this shake-up a year or two from now.

Ian G. Browning, CFA
Managing Director, Investment Strategies | Shareholder

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