The final stages of 2023 couldn’t have gone much better for the stock market. The S&P 500 is very close to a record high and on track for its ninth consecutive week of gains. That’s the longest winning streak since January 2004.
The prolonged year-end rally is largely down to shifting interest-rate expectations for 2024, after the Federal Reserve opened the door to rate cuts at its final meeting of the year. But investors are unlikely to forget the part played by artificial intelligence and the megacap tech stocks earlier in the year.
Three sectors have stood out and enjoyed a bumper 2023. Unsurprisingly, the information technology sector is the best performing—up 57%—helped by Nvidia’s extraordinary 239% rally and strong gains for
Apple,
Microsoft,
and other tech names. It’s the sector’s best year since 2009.
The communication services sector is on track for its best ever year, thanks to notable contributions from Meta Platforms, which has climbed 198% in its so-called year of efficiency, and
Alphabet.
Another key feature of 2023 was the recession that never came. The U.S. economy remained remarkably resilient, largely due to the strength of consumer spending.
As a result, the consumer discretionary sector is also on pace for its best ever year, according to Dow Jones Market Data, climbing 42%. Cruise stocks
Royal Caribbean
and Carnival are both in the S&P 500’s top 10 best performers, highlighting the strong demand for travel this year among Americans.
Both companies and rival
Norwegian Cruise Line
have had record gains this year. It’s also the best year in history for shares of Meta,
Broadcom,
General Electric,
Airbnb,
and
DowInc.
Investors can now spend the long holiday weekend toasting their annual gains and celebrating the new year. But the rest will be brief as next week brings the minutes from the Fed’s recent meeting and a raft of employment data, culminating in December’s jobs report.
The labor market needs to keep cooling if 2023’s year-end gains are to survive the early part of 2024.
—Callum Keown
***
Gasoline Prices Could Fall to $3.38 a Gallon in 2024
GasBuddy forecasts that the national average price of gasoline will fall to $3.38 per gallon in 2024, the second straight year prices have dropped. Consumers could see the lowest prices in January, with an average of $3.11 per gallon, while May could average $3.67 per gallon.
- Patrick De Haan, Head of Petroleum Analysis for the fuel savings platform and app, told Barron’s that 2024 could bring some volatility, but he doesn’t expect the $5 and $6 per-gallon prices seen this year. He sees diesel prices falling to $3.87 a gallon, from $4.24 this year.
- Americans are expected to spend nearly $447 billion on gasoline in 2024, down from the $479.2 billion this year. The U.S. is producing record amounts of crude oil, the Strategic Petroleum Reserve is half full and rising, and the risk from the Russia-Ukraine war is falling, De Haan said.
- While global refinery capacity has increased, robust economic growth in emerging markets could gobble up added capacity. If the Organization of the Petroleum Exporting Countries and its allies do not ease production cuts by mid-2024, that could raise gas prices in the second half of the year.
- Although electric vehicles are popular among those who can afford them, everyday Americans are worried about their cost, longevity, and charging technology. If President Biden loses the 2024 election, a new leader could reverse his administration’s subsidies and tax credits and slow the nation’s transition to EVs, De Haan said.
What’s Next: Although the Federal Reserve has suggested it may begin cutting interest rates in 2024 if the economy slows more than expected, there could be downside risk to GasBuddy’s outlook, De Haan said. If the Fed cuts rates too quickly, there could be upside risk as consumers increase spending.
—Janet H. Cho
***
U.S. Holiday Air Travel On Pace to Break Records
The U.S. is halfway through what AAA predicted would be the nation’s busiest holiday travel period ever for domestic airports, having forecast 7.5 million plane passengers. The Transportation Security Administration, however, has already screened more than 11.9 million passengers at airport checkpoints from Dec. 23 to 27.
- That figure is 17% higher than the number of passengers—10.1 million—who flew over those dates in 2023, and 2% above the nearly 11.7 million people who traveled during that span in 2019, according to TSA figures.
- AAA had projected the number of air passengers between Dec. 23 and Jan. 1 would beat the previous record of 7.3 million passengers in 2019. AAA expects 115 million Americans to travel 50 miles or more from home this year, including nearly 104 million by car.
-
Southwest Airlines
last week was fined a record $140 million by the Department of Transportation for canceling more than 16,000 flights over the 2022 holiday season, stranding passengers nationwide. “It will never happen again,” CEO Bob Jordan said earlier this month. - This year, Southwest canceled 783 flights between Dec. 23 and 26 because of thick fog at Chicago’s Midway Airport, compared with 7,185 over those dates last year. Southwest activated its new “disruption pod” to identify crews in danger of missing connections and reaching working-hour limits.
What’s Next: The Federal Aviation Administration said it expects this week’s flights to peak at more than 48,000 on Saturday, before falling to 32,000 flights on New Year’s Eve.
—Janet H. Cho
***
Nvidia, Meta Stocks On Pace to Top S&P 500
Nvidia’s
stock has soared 239% this year and is the top performer in the
S&P 500,
on pace for its best annual performance since 2001, according to Dow Jones Market Data. Nvidia, which makes the chips used to power artificial intelligence, hit a $1 trillion market capitalization in August.
-
Meta Platforms,
up 198% in 2023, is the second-best performer in the S&P 500, due to investor excitement around AI and its own cost-cutting.
Tesla
shares have gained 106% in 2023, its best year since 2020, despite recently cutting vehicle prices. -
Other stocks have had a stellar 2023, too.
Carnival
stock rose 132% this year, its best year on record, benefiting from soaring post-Covid travel demand and record fourth-quarter revenue. Shares of
Uber Technologies,
which joined the S&P 500 this month, are up 155%. -
Shares of
FMC
have tumbled 49% this year, making the crop-protection company the worst performer in the S&P 500, after FMC slashed its guidance ahead of third-quarter earnings. FMC has a better-than-expected outlook for 2024.
Enphase Energy
stock is off 49% in 2023, and was a Barron’s pick in September. -
Dollar General
stock is down 45% this year, its first annual decline on record. The discount retailer’s former CEO Todd Vasos returned from retirement amid disappointing earnings results, guidance cuts, and macroeconomic challenges.
What’s Next: Vaccine makers
Moderna
and
Pfizer
are down 45% and 44%, respectively, in 2023, after soaring during the coronavirus pandemic. But Barron’s has reported that gains may be on the horizon.
—Janet H. Cho, Angela Palumbo, and Emily Dattilo
***
—Newsletter edited by Zoe Szathmary, Patrick O’Donnell, Rupert Steiner
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