The Buzz on Business for Monday, January 22nd, 2024.

A new all-time high for the Dow. A new, all-time high for the S&P 500. A new two-year high for the Nasdaq. Did someone, maybe, cut interest rates while I wasn’t looking? Oh no! Since Christmas Day, the yield on the 20-year treasury has spiked from 4.094% to 4.528%.

But, but, but, I thought stocks needed falling rates and a compliant Federal Reserve to, you know, make sustained gains.

Stock Market Report

We speculated on this podcast two weeks ago or so that the broad market might have entered a correction and that the S&P 500 might retrace to around 4,500 or so.

We were WRONG!

Stocks did pull back after the first of the year but have moved steadily higher over the last two weeks in the face of rising rates and powered to new heights on solid volume on Friday.

• The Dow Jones Industrials were up 1.05% on Friday. That’s 395 points. They start the week today at 37,864.
• The S&P 500 was up one and a quarter percent, fifty-nine points. It closed at 4,840.
• The Nasdaq Composite closed at 15,311, up 255 points or 1.7%.
• The RSP, that’s the S&P 500 Equal Weight Index Fund, was up eight-tenths. The SOXL, the Philly Semiconductor Index with three-to-one leverage, was up an astounding 11.77%

Bond Markets

Bonds were mixed. Yields at the shorter end of the curve fell while longer-term rates rose, but all the bond market action was mild, especially compared to stocks.

• The 2-year treasury closed with a yield of 4.389%, that’s up three basis points.
• The 20-year was down three ticks and now yields 4.462%

Commodities 

• Oil traded in a tight range before giving up forty-one cents and closing at $73.39.
• Gold was up $7.70 and now changes hands at $2,029.30 a troy ounce.

And we’ve decided to add Bitcoin to our daily market report. We’ve just released a Premium episode on Bitcoin and the newly issued Bitcoin ETFs. You won’t want to miss it!

• Bitcoin closed Friday at $41,685, up $353.00 or nine-tenths of one percent.

Taiwan Chipmaker and AI Hype Lift Markets Despite Rate Spikes

So, to what do we attribute this latest rally, especially in the face of rates moving higher, some bad inflation news, and hawkish Fed-speak?

Beats me!

The proximate cause was the earnings report from Taiwan Semiconductor and general bullishness from all things Artificial Intelligence.

It is possible that AI will be to the Roaring 20s what personal computing and the internet were to the 1990s. That doesn’t mean you mortgage the farm and throw everything you’ve got into the latest AI meme stock, Maybe just, you know, a diversified portfolio of index funds with a bond fund or two thrown in for good measure?

The wild card is inflation and the government’s insistence on mismanaging the currency and the economy. How long will it be before some politician starts pounding his fist and insisting that rates be cut? In an election year? And especially since the government is now making payments on $40 trillion in debt.

If the Fed can tune all of it out and do its job, this market looks poised to go higher. And then, if we get some rate cuts. . .