“People can do more than they ever believe they can do. Physically, mentally, academically. You have to be pushed. It hurts. But it's worth it, and it's a great thing. ~Sugar Ray Leonard

Good evening,

Equities had something of an uncertain start this week, with the S&P 500, Nasdaq, and DJIA all declining. On Tuesday, the S&P 500 fell more than 1%, and as Fundstrat Head of Research Tom Lee pointed out, such declines often cause habitual top callers to proclaim the end of the latest up move. 

However, Lee pointed out that after each of the last two times such declines took place – January 31, 2024 and February 13, 2024, “those dips were bought and the market went on to make new highs.” That happened again this week, with the S&P 500 making new highs on Thursday.

Nevertheless, Lee sounded a cautionary note. As he has pointed out in the past, one signal of an impending top is stocks falling after good news. As he sees it, “in a way, a drop in rates is a ‘good news’ event,” yet when yields fell on Tuesday, the stock market also fell (as shown in our Chart of the Week). Because of this, he urges watchfulness even though he continues to suspect that there is still “gas in the tank” of this rally.

Markets rose on Wednesday and Thursday as Federal Reserve Chair Jerome Powell gave his semi-annual testimony to Congress. Powell’s remarks, which did not deviate in any material sense from his recent statements, appear to have reassured investors that rate cuts remain on the table for 2024. 

Like Lee, Fundstrat Head of Technical Strategy Mark Newton remains constructive on equities. “I suspect that SPX is en route to ~5200 and potentially even 5250 by March 20, and it’s necessary for SPX to break 5057 on a daily close to have any concern about even a minor two-day pullback,” he said. Newton also pointed out that the equal-weighted S&P 500 has made its sixth straight weekly gain. “Technology underperformance is making the market seem worse than it actually is [...] and it’s worth pointing out that this week’s negative weekly close for SPX is only the third such week in four and a half months.”

Regarding Apple (AAPL 1.18% )

Newton took time to address the recent price action of a Tech stalwart, Apple (AAPL 1.18% ). Apple’s underperformance has been ongoing since last summer, and he acknowledged that “its recent lagging has been noteworthy and something to keep an eye on in the weeks to come.” Yet “there’s ample evidence that 'Magnificent 7' stocks can certainly carry markets higher without the aid of AAPL.” Specific to Apple investors, Newton said, “Overall, I feel like AAPL makes sense technically near $166; if the stock falls lower, that would possibly allow for a brief move to $158-$160.

Bitcoin reaches milestone

BTC hit a new all-time high on Tuesday, in part due to significant inflows into BlackRock and Fidelity ETFs. “For those just entering the fold, new all-time highs are historically great entry points,” pointed out Fundstrat Head of Digital Assets Sean Farrell. 

BTC prices turned lower soon after hitting new all-time highs, likely due to the volume of highly leveraged long positions, the increase in funding costs for leverage, and sell orders tethered to previous all-time highs. Another reason, in Farrell’s view, was weakness in equity markets. “We’ve been largely decoupled, but the traditional financial system, on a near-term basis, still permeates crypto, so the weakness in equity markets also added to selling pressure on Tuesday.”

Regardless of the reason, selling action after hitting an all-time high “was not abnormal,” he said. Similar pullbacks occurred after BTC hit all-time highs in 2017 and 2020, but after breaking through the technical resistance in those instances, “we saw some pretty parabolic returns, and they happened quite quickly.” Based partly on his historical analysis, Farrell told us, “If we do see some sideways churning over the next few weeks, I would not be surprised, but I think any weakness is worth buying into.”

Elsewhere 

China has announced an economic growth target of 5%, despite the country’s recent wide-ranging economic challenges, which include an ailing property sector, a deflationary environment, high levels of local government debt, high youth unemployment, an aging population, and slowing productivity growth. While some view the target as ambitious given the country’s current situation, it is low compared to China’s growth rates in recent history. Chinese Premier Li Qiang announced the objective in the opening speech of the annual National People’s Congress.

Claude 3, the AI chatbot developed by Anthropic, might have approached self-awareness – sometimes considered a marker of natural intelligence – by apparently detecting that it was being tested. During the test, Claude, when asked to identify a single out-of-place sentence inserted into a large volume of documents, responded, “This pizza topping 'fact' may have been inserted as a joke or to test if I was paying attention." 

Far-left extremists claimed credit for a suspected arson attack that shut down production at a Tesla assembly plant outside Berlin – the EV company’s only such facility in Europe. The so-called “Volcano Group” said they were responsible for setting fire to an electricity pylon near the factory, which caused power outages at the plant and in nearby towns. The facility has long attracted criticism from environmentalists who object to its impact on nearby forests and water supply.

The average U.S. consumer has become less creditworthy, according to FICO. The average credit score fell to 717 (on a scale of 300 - 850) in October 2023, down one point in the beginning of 2023. It was the first such decline since 2014.

And finally: The Taylor Swift effect arrived in Southeast Asia, with six shows in Singapore – sold out, of course. Many of Singapore’s neighbors have expressed anger that the city-state used subsidies to persuade “T-Swizzle” to make it her only stop in the region – a deal that likely brought significant economic benefits to the Lion City.