Market Temperatures Cool as S&P 500 Dips, Despite Glimmers of Sector Strength

Vida Markets

Wednesday 27th March 2024, 8:05 am Time to read: 6 mins.

As the curtain draws on March, the stock market has hit a gentle pause, with the S&P 500 marking its third consecutive session in the red. This cooling off comes after a series of record highs last Thursday, demonstrating a market that, while resilient, is not immune to fluctuations. Despite this, there are still sectors

As the curtain draws on March, the stock market has hit a gentle pause, with the S&P 500 marking its third consecutive session in the red. This cooling off comes after a series of record highs last Thursday, demonstrating a market that, while resilient, is not immune to fluctuations. Despite this, there are still sectors showing signs of life. Notably, Krispy Kreme sweetened the deal, rallying as it expands its partnership with McDonald's. These movements underscore a market in transition, navigating between caution and optimism, as investors digest a mix of economic signals and await further clarity on inflation and consumer spending trends.

Key Takeaways:

Slight Market Retreat Amidst Record Highs: The S&P 500 saw a slight decrease of 0.1%, continuing its downward trend for three consecutive sessions, despite reaching record highs just last Thursday. The Dow Jones Industrial Average, hovering around the 40,000 mark, ended nearly flat, reflecting a cautious market posture amidst broader optimism.
Economic Signals Mixed: The market's restrained optimism is reflected in the economic indicators, with durable goods orders surpassing expectations contrasted by a dip in consumer confidence. This suggests an economy that remains strong yet is challenged by ongoing inflation concerns.
European Markets Edge Higher: European stocks slightly increased, with the Stoxx 600 index rising by 0.3%. This uptick came as investors went over recent central bank policy decisions from Europe and the US Retail stocks led the gains, rising 1.5%, while mining stocks saw a 0.5% decline. Notably, Ocado's shares climbed 3.2% after reporting a significant year-on-year revenue growth in its retail division for the first quarter, showcasing the potential for selective sector growth amidst general market hesitance.
Asian Markets Show Optimism: In Asia, the mood was more buoyant. South Korea's Kospi index reached a two-year high, helped by major chip stocks like Samsung Electronics and SK Hynix, which climbed 1.66% and 3.25%, respectively. This rally reflects growing investor confidence in the region's technological and economic prospects. Japan's markets remained steady, with the Nikkei 225 closing flat and the broader Topix index marginally up by 0.11%. Singapore's manufacturing output saw a notable increase of 14.2% in February, further highlighting Asia's robust economic activity.
Resilience in Tech and Consumer Goods: Tesla's shares surged by 3%, indicating a rebound for the electric vehicle leader. Seagate Technology witnessed an 8% jump after receiving an optimistic upgrade from Morgan Stanley due to AI advancements. Moreover, Krispy Kreme enjoyed a 30% rally after expanding its partnership with McDonald's, pointing to sector-specific growth opportunities even as overall market momentum slows.
Fluctuations in Currency and Oil Markets: The US Dollar Index saw slight gains, reflecting mild currency market movements. Oil prices experienced minor declines as traders evaluated the impact of geopolitical tensions on global supply, with WTI for May dropping to $81.62 a barrel.
FX Today:

US Dollar Index Sees Mild Gains: The US Dollar Index (DXY) found itself hovering around the 104.20 mark, securing mild gains against a basket of currencies. This comes as the market digests durable goods and housing market data, with investors' eyes set on the personal consumption expenditure and labour market openings readings due later in the week. The DXY's position above the 20, 100, and 200-day Simple Moving Averages (SMAs) shows a bullish sentiment dominating the greenback's trajectory.
EUR/USD Faces Downward Pressure: The Euro struggled against the US dollar, failing to breach the 200-day moving average decisively. The pair has the possibility of challenging the 1.0800 level. Should this support give way, the next targets lie at the February 20 low of 1.0761 and the February 14 swing low of 1.0694. Conversely, a resurgence above the 200-DMA at 1.0837 could set the stage for attempts at higher resistance levels, hinting at a persistent tug-of-war between buyers and sellers in the eurozone's currency market.
Canadian Dollar Stages a Modest Recovery: The USD/CAD pair witnessed a slight retreat from its peak, with the Canadian dollar clawing back, reflecting a minor corrective phase. The pair's dance around the 1.3580 mark suggests an underlying bullish sentiment for the USD against its Canadian counterpart. Yet, with Friday's inflation data on the horizon, the loonie's resilience will be tested, potentially affecting its short-term fortunes.
AUD/USD Dips During Bearish Sentiment: The Australian dollar edged lower, touching 0.6535 as bearish momentum continued to grip the pair. Despite a brief pause in the bears' advance, the broader outlook suggests continued pressure, with the AUD/USD's trajectory heavily influenced by global risk sentiments and commodity price fluctuations. 
Gold's Price Ends Flat: Gold prices managed to sparkle briefly, climbing toward $2,167. The precious metal's push towards the $2,170 area, while the Relative Strength Index (RSI) hinted at upward momentum, suggests an ongoing battle for direction. Gold enthusiasts eye the $2,200 benchmark as a critical hurdle to sustain the uptrend, aiming for a re-test of the all-time high at $2,223.
Market Movers:

Krispy Kreme Jumps on Expansion News: Krispy Kreme's stock soared, closing up an astonishing 39%, marking its best day on record. This surge followed the announcement that McDonald’s intends to sell Krispy Kreme doughnuts across its nationwide outlets by the end of 2026, with an initial rollout expected later this year. McDonald’s shares, in contrast, showed minimal change.
McCormick Spices Up the Market: McCormick shares were seasoned with success, jumping 10% after the spice company reported fiscal first-quarter earnings and revenue that exceeded expectations. With adjusted earnings per share at 63 cents versus the forecasted 58 cents, and revenue reporting at $1.6 billion against the $1.55 billion anticipation, McCormick showcased its robust market position.
Reddit Rallies Post-IPO: The social media platform Reddit saw its shares pop about 9%, continuing to draw investor interest following its recent debut on the New York Stock Exchange. After a 30% rally on Monday, Reddit's momentum underscores the market's appetite for new tech entrants.
Viking Therapeutics Surges on Drug Trial Success: Viking Therapeutics shares surged nearly 17% after announcing promising results from a small trial of its experimental weight loss drug. With plans to advance to the next development stage this year, Viking’s stock movement reflects investor optimism for its pharmaceutical pipeline.
Seagate Technology Upgraded on AI Optimism: Shares of Seagate Technology gained 7.4% following an upgrade from equal weight to overweight by Morgan Stanley. The firm’s confidence in Seagate’s earnings potential from generative AI and other factors fuelled the stock’s upward trajectory.
Micron Technology Bolstered by Bullish Outlook: The memory chipmaker Micron Technology enjoyed a 1.4% increase after Mizuho Securities reiterated its buy rating and raised its price target. The firm highlighted a strong AI opportunity that could contribute to stronger sales in the coming years.
UPS Faces Scepticism After Forecast Update: UPS shares took a hit, dropping more than 8% as the market digested its long-term revenue forecast. Despite expectations of revenue reaching $114 billion by 2026, analysts expressed concerns over the forecast's underlying assumptions.
Canada Goose Declines on Workforce Reductions: Shares of Canada Goose fell approximately 7% after the luxury outerwear brand announced plans to cut 17% of its global corporate workforce in a bid to streamline operations and reduce costs amidst shifting consumer spending patterns.
Super Micro Computer Experiences Minor Setback: After an initial surge, Super Micro Computer shares ended the day down 1.7%. The company had gained attention earlier following a bullish initiation by JPMorgan, highlighting its leadership in the burgeoning AI compute market.
As the month of March draws to a close, the US equity markets experienced a momentary pause in their remarkable rally, with investors temporarily taking a moment to digest the latest economic data and brace for pivotal reports. While enthusiasm surrounding AI and optimism about the economy remain key drivers, the market's focus has shifted to understanding the intricate relationship between growth and inflation. As investors await crucial data releases, the stage is set for potential shifts in sentiment and policy expectations, highlighting the evolving dynamics shaping the financial landscape.


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