WEEKLY MARKET RECAP – DECEMBER 29, 2023

The major U.S. stock indexes secured their ninth consecutive positive week as 2023 came to a close, with the S&P 500 just 0.6% below its record closing high of January 3, 2022. The Dow rose by 0.8% for the week, the S&P 500 added 0.3%, and the NASDAQ edged upward by 0.1%.

In 2023, the S&P 500 achieved an overall gain, marking the fourth positive year out of the past five and a significant rebound from 2022’s negative outcome. The index generated a total return of 26.3%, offsetting the prior year’s decline of 18.1%. Other indexes also posted strong results, with the NASDAQ adding 44.6% in 2023 and the Dow gaining 16.2%.

A shift in the interest-rate outlook at the end of 2023 sparked a turnaround in the government bond market. After experiencing significant price declines and spiking yields in 2021 and 2022 due to rising inflation, the yield of the 10-year U.S. Treasury reached its peak near 5.00% in mid-October 2023, the highest since 2007. However, it then sharply declined, ending the year at 3.88%, the same as the year-end yield in 2022.

The past year witnessed a notable performance rotation in equity styles. In 2023, a small group of mega-cap growth stocks surged, leading to a total return of 42.7% for the U.S. large-cap growth index, compared with 11.5% for its large-cap value counterpart. This was a reversal from 2022 when value outperformed growth.

The concentrated nature of the U.S. stock market’s gains was evident, with seven mega-cap companies in the information technology, communication services, and consumer discretionary sectors contributing significantly. In 2023, these seven stocks collectively accounted for 62.2% of the total return of the entire S&P 500, according to S&P Dow Jones Indices.

Despite making up ground in the last two months of the year, U.S. small-cap stocks lagged behind large-caps in 2023. The Russell 2000 Index, a small-cap benchmark, generated a total return of 16.9% compared to 26.5% for its large-cap counterpart. However, the small-cap index surged 22% in the final two months of 2023.

U.S. equity performance at the sector level showed wide disparities in 2023. Information technology and communication services were the top-performing sectors, generating total returns of 57.8% and 55.8%, respectively. In contrast, utilities posted a return of -7.1%, and energy was -1.3%.

The most closely watched economic report in the opening week of 2024 is likely to be the labor market update scheduled for Friday. This release, covering December, follows a better-than-expected November report, showing the economy added 199,000 new jobs—above October’s job growth of 150,000 but below the 12-month average of 240,000.

Major U.S. Economic Reports

Closing Prices for the Week

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