The major stock indices closed higher on Wednesday for only the fourth time in the past 15 days. We are ignoring February 26 as the index gains were meaningless. Some of the indices have bounced only to their sharply falling five-day exponential average and stalled. It was the second risk-on day in a row, with gains in Information Technology, Energy, Consumer Discretionary, Communication Services, and Financial. Defensive Consumer Staples was whacked over 2%. The largest gainers on the S&P 500 (SPX) and the Nasdaq 100 (QQQ) were again the recently beaten-up IT issues as well as Utility stocks that benefit from the AI and data center buildouts. We talked about improvement in some of the breadth stats yesterday and will add a few more today. The number of NYSE new 52-week lows peaked at 218 on March 4 and dropped to 94 as of March 11. At the same time, the NYSE is at a lower level. The percentage of new lows (of total issues) peaked at 8% back in December and is now at 5%. We get worried when the percentage of lows rises above 10%. NYSE advancing volume bottomed on March 3, although declining volume hit a new high on March 10. We remain worried as only 40% of SPX stocks are above their 200-day, with the danger zone below 45%. For the S&P 100, 50% of stocks are above their 200-day. For the QQQ, the result is 42%. The VIX Volatility index closed outside its upper daily Bollinger Band on Monday, fell inside the upper band on Tuesday, and closed lower on Wednesday. This three-day sequence created a VIX sell signal and S&P 500 buy signal. (Mark Arbeter, CMT)

Netflix is a video-on-demand distributor of movies and television shows over the internet worldwide (except China and a few other countries). Subscribers have access to the Netflix content library for a fixed monthly subscription fee. The company offers several service tiers, including a discount, advertising-supported service. Netflix derives 59% of its revenue from outside the U.S.

Fourth-Quarter 2024: Challenging End to a Positive Year The S&P 500 advanced 2.4% in 4Q24n 2024, but the ride was bumpy. November was the best month of 2024 for the S&P 500, yet both October and December were negative. Enthusiasm regarding the Donald Trump's second term was tempered by concerns that some new policies risked new rounds of inflation. The Fed has yet to get the inflation genie 'back in the bottle,' as most pricing metrics remain a point or so above the Fed's 2% target range. The fourth quarter did include positive data from the third quarter, such as the better-than-expected 3Q24 earnings season and above-consensus 3Q24 GDP growth. The jobs economy, long predicted to slow, showed surprising strength into year-end. Interest rates rose into year-end, however, quashing hopes for a quick rebound in the housing market and in big-ticket purchases such as vehicles. The fourth quarter also included an intensification of the sector rotation away from traditional growth areas to a broad swath of sectors with cyclical, rate-sensitive, and defensive characteristics. December featured a counter-rotation within that rotation, as newly favored sectors were hit hardest during the holiday month selling. The net effect of all this rotation was a broadly advancing market for the full year, which positions stocks well for the 2025 year. The Fourth Quarter of 2024 -- The U.S. stock market extended momentum from the first nine months of 2024 into the fourth quarter. But gains were muted, punctuated by a negative December for most indices. -- The S&P 500 advanced 10.6% on a total-return basis (with dividends) in 1Q24, 4.1% in 2Q24, 5.9% in 3Q24, but just 2.4% in 4Q24. -- Much as the strong third quarter for stocks was akin to the first quarter, the stock market in 4Q24 reprised the challenging pattern of the second quarter. Sector rotation away from traditional growth leaders intensified in 4Q24, notwithstanding a pivot back to growth in December. -- Although all three months of the fourth quarter historically are positive for the S&P 500, negative performances in October 2024 (down 1.0%) and December (down 2.5%) bracketed a positive November (up 5.7%) following Donald Trump's reelection. -- During 3Q24, the Fed appeared confident that it had won its long-running battle with inflation. In 4Q24, signs of inflation stalling and concerns about fiscal policy under the incoming administration triggered new caution at the central bank. -- The Fed, which cut interest rates by 50 basis points at the September FOMC meeting, followed with quarter-point cuts at its November and December meetings. -- While the December rate cut was as expected, post-FOMC commentary from the Fed noted potential changes in the 'extent and timing' of additional rate cuts and that it would be 'appropriate to move cautiously' on any additional easing. -- The Fed's preferred inflation gauge, the core PCE price index, rose just 0.1% in November versus 0.3% in October. However, this metric was up 2.8% year over year in November, unchanged from October. The annual change has hardly moved from 2.7% in July. -- The Fed's new caution on rate-cut timing, stalled inflation, and concerns about fiscal policy caused long-maturity interest rates to move higher into year-end 2024. -- The 10-year Treasury yield was 4.57% as of the end of December, compared with 4.18% as of the end of November; the cycle peak was 4.9% in October 2023. The two-year Treasury yield was 4.25% as of the end of December, up from 3.55% at the end of September though below the peak level of 5.2% in October 2023. -- The yield curve returned to a normal slope in September 2024 for the first time in two and a half years. While we likely have seen the end to twos/10s inversion in this cycle, two- and 10-year yields could remain in proximity in the near term. -- The jobs economy was volatile in the fourth quarter of 2024. The U.S. economy generated just 43,000 new jobs (revised) in October, due to the Boeing strike and major hurricanes. Return of those workers resulted in above-consensus growth of 212,000 (revised) in November nonfarm payrolls. -- December nonfarm payrolls rose 256,000. The unemployment rate was 4.1% in December 2024 versus 4.2% in November and 4.1% in October. The multi-year high of 4.3% was reached in July 2024, but subsequently was revised to 4.2%. Average hourly earnings continue to grow at about 4.0% year over year. Annual wage growth continues to run above inflation, but the premium has narrowed. -- Industrial production decreased 0.1% in November after dipping 0.3% in October. The strike at Boeing and two major hurricanes reduced Industrial Production in fall 2024. Capacity Utilization was 76.8% in November, the lowest since 2021 and about three points below the long-run average. -- ISM's manufacturing PMI came in at 49.3% for December 2024, up from 48.4% for November 2024 -- though in contraction territory (below 50) for the twenty-fifth time in the past 26 months. -- ISM's services PMI was at 54.1% in for December 2024, up from 52.1% for November. Services PMI has indicated expansion in 52 of 55 months since the onset of the COVID-19 pandemic. -- The NFIB's Small Business Optimism index soared to 101.7 in November, up eight points from 93.7 in October, this on enthusiasm regarding a change to a more business-friendly administration. November broke a string of 34 consecutive months below the 50-year average of 98. -- The consumer seems slightly more optimistic, or is perhaps reconciled to higher prices. Retail sales rose 0.7% in November, on top of 0.4% growth in October, and were up 3.8% year over year. The University of Michigan Consumer Sentiment Index reached 74.0 in December 2024, up from a 71.8 in November 2024. -- S&P 500 earnings for 3Q24 rose in low-double-digit percentages year over year, marking a fifth consecutive quarter of annual EPS growth. -- Around 75% of companies exceeded consensus expectations for 3Q24 EPS versus 70%-75% on average. The magnitude of the beat, however, was at the low end of the 5%-8% historical range. -- Third-quarter 2024 GDP grew 3.1%, following growth of 3.0% in 2Q24 and 1.6% in 1Q24. Personal consumption expenditures for 3Q24 increased 3.7%, while nonresidential fixed investment rose 4.0%. Together, these two components make up over 80% of GDP. -- After a worrisome level of AI-driven sector concentration in 2023, investors began to rotate away from growth and toward other parts of the stock market early in 2024. That rotation intensified in the second half of the year. -- During the fourth quarter and December in particular, the best-performing sectors were the traditional growth leaders: Communication Services, Information Technology, and Consumer Discretionary. That was in contrast to 3Q24, when interest rate-sensitive sectors - Real Estate and Utilities - led the market. Four sectors outperformed the S&P 500 in 2024. The three traditional growth sectors were joined by Financial, which finished with a 30% gain despite the December sell-off. -- For all of 2024, the S&P 500 delivered a total return (with dividend) of 25.0%. The Nasdaq rallied in 4Q24 and finished the year up 29.6%. The similarity in S&P 500 and Nasdaq performance in 2024 reflects heavy investor concentration in the so-called Magnificent 7 stocks, which lead both indices. Conclusion Similar to December 2024, January 2025 has had some bumpy moments; but the month has been positive for stocks. Heading into the holiday-shortened week of 1/20/25, the S&P 500 was up 2.0% in the 2025 year to date. In a reversal of last year's leadership, the Nasdaq Composite is up 1.7% while the Dow Jones Industrial Average is up 2.2%. The bond market is barely changed year to date, as most yields across the maturity spectrum are bobbing around year-opening levels. Investors have been attuned to monetary policy for the past three years but must now turn their attention to fiscal policy. The new administration has pledged to act quickly on a range of issues, including further tax cuts, widespread tariffs, and immigration. While it is too soon to speculate on the actual policies that the administration will put before a friendly Congress, the playing field has definitely shifted, and investors will need to be nimble. In 2024, the market avoided any bone-rattling corrections. Selling spasms are positive in the long run but painful in the moment. Given the change in administrations and the shift from a monetary policy focus to a fiscal policy focus, the stock market seems unlikely to go a second straight year without some level of stock turbulence. That said, we believe the U.S. stock market in 2025 is positioned for another year of gains.

Netflix’s relatively simple business model involves only one business, its streaming service. It has the biggest television entertainment subscriber base in both the United States and the collective international market, with more than 300 million subscribers globally. Netflix has exposure to nearly the entire global population outside of China. The firm has traditionally avoided a regular slate of live programming or sports content, instead focusing on on-demand access to episodic television, movies, and documentaries. The firm introduced ad-supported subscription plans in 2022, giving the firm exposure to the advertising market in addition to the subscription fees that have historically accounted for nearly all its revenue.