Market snapshot: mixed fortunes for stocks and indices

Investors found little to cheer, with brewing tension between the US and Iran overshadowing matters closer to home.

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There is some debate as to whether the rhetoric from the White House is another example of the President’s tendency to shoot from the hip, or whether some kind of military intervention is actually possible given that the US is beginning to amass forces in the region. In any event, given Iran’s access to the transportation of oil, a further surge in crude resulted in the price having risen by 18.5% in the year to date, while gold rose once more given its defensive asset status.

Elsewhere, the theme which has been established this year continued, with asset managers and software companies under pressure as a result of the AI “scare trade”. In addition, retail bellwether Walmart Inc (NASDAQ:WMT) delivered results which beat estimates for the fourth quarter, but the company’s guarded outlook weighed on a price which swayed between positive and negative. Investors were assessing whether the guidance was simply typical of Walmart’s usually cautious estimates, or whether the consumer is truly showing signs of decline.

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Further colour could come today in the form of the latest GDP reading, while the release of the Personal Consumption Expenditures index, the Federal Reserve’s preferred measure of inflation, may well cement its current policy of staying put on interest rates for the time being.

The main indices have yet to break away from the skittish environment as investors continue to diversify away from the mega cap technology stocks, and the “Magnificent Seven” in particular, given their extraordinary investments in AI. 

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The Dow Jones has added 2.8% in the year to date and the smaller-cap Russell 2000 6.3%, but the Nasdaq has fallen by 2.4%. The benchmark S&P500 is a case in point. The index has added just 0.2%, but the S&P500 Equal Weight Index, which allocates a 0.2% weighting to each of the constituents and therefore ignores market capitalisations, has risen by 5%, proving both that the rotation trade is alive and well and that the ”S&P 493' are doing most of the heavy lifting.

In the UK, there was some rare positive news as the government recorded a record budget surplus of £30.4 billion in January, above the estimated £24 billion, although the bears will note that the month is traditionally the highest of the year due to the receipt of self-assessment tax bills. 

Elsewhere, there was another positive shock as retail sales showed growth of 1.8% in January, breezing past the expected 0.2% rise and 4.5% annualised. Sales at online jewellers got an honourable mention, as did artwork and antique, with the January sales a further likely contributor for retailers.

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After a lacklustre session yesterday, the main UK indices regained some positive momentum at the open. The more domestically focused FTSE250 bounced back, in part driven by the economic news, and has now added 5.1% in the year to date. Meanwhile, the rise of the FTSE100 takes its performance to a positive 7.2% so far this year, and within touching distance of the record high set earlier in the week.

Gains were broad based, including bumps for Burberry Group (LSE:BRBY) and JD Sports Fashion (LSE:JD.), while the banks and miners continued on their upward march after a very brief hiatus. Diageo (LSE:DGE) and the London Stock Exchange Group (LSE:LSEG) rose ahead of results next week, with a reported management shakeup at the former and reaction to stake building at the latter providing a positive impetus.