Commentary: semiconductors carry S&P 500 as market sees less rate cuts in 2024
Since the start of 2024, the US reported macroeconomic data that make quick rate cuts less likely. Firstly, December inflation surprised on the upside, increasing from 3.1% to 3.4%. Secondly, economic activity indicators, such as retail sales, consumer sentiment, and building permits have shown resilience. Strong economic activity implies more inflationary pressures that in turn anticipate more hawkish Fed. As a result, Russell 2000 (US small-cap equity index) and S&P 500 equal weight index have lost -4.1% and -0.9%, respectively, year-to-date. Meanwhile, fixed income yields are up, as 2-year and 10-year US treasuries have gained 15 bps and 24bps, respectively.
On a positive note, semiconductors stocks have delivered strong returns. In just 13 trading days, Advanced Micro Devices (AMD) and NVIDIA (NVDA) are up near 26% and 24%, respectively, while VanEck Semiconductor ETF (SMH) has gained 11%.
