The Week On Wall Street
Growing concerns about further interest rate hikes, prompted by fresh economic data, reversed early-week gains and left stocks mixed for the week. The Dow Jones Industrial Average slipped 0.13%, while the Standard & Poor’s 500 fell 0.28%. The Nasdaq Composite index advanced 0.59% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, gained 0.52%.
Rate Concerns Weigh on Stocks
Stocks opened last week higher on investor hopes that a continued cooling in inflation might support a more dovish Fed. A higher-than-expected rise in the Consumer Price Index (CPI) and strong retail sales in January initially did little to dent that enthusiasm, as stocks posted solid gains through Wednesday’s close. But that optimism faded on Thursday as a surprising rise in producer prices and another decline in initial jobless claims triggered worries the Fed would stay the course for longer. Comments from two Fed officials supporting a more aggressive rate hike stance added to the unease, erasing much of the week’s gains. Stocks ended mixed on Friday, capping a choppy week.
Inflation Moderation Pauses
Consumer prices climbed 0.5% in January, fueled by rising shelter costs and energy prices. The increase in the CPI was higher than the 0.1% rise in December and slightly above the consensus estimates of 0.4%. The year-over-year inflation number (6.4%) came in lower than December’s 12-month rise of 6.5%, making it the seventh consecutive month of declining year-over-year inflation. January’s product price report showed a surprise 0.7% increase, higher than the 0.4% rise expected by economists and the biggest jump since June. Year-over year, producer prices rose 6.0%, a slight improvement from December’s number.
This Week: Key Economic Data
Tuesday: Purchasing Managers’ Index (PMI) Flash. Existing Home Sales.
Wednesday: FOMC Minutes.
Thursday: Jobless Claims. Gross Domestic Product (GDP).
Friday: New Home Sales. Consumer Sentiment.
This Week: Notable Companies Reporting Earnings
Tuesday: Walmart, Inc. (WMT), The Home Depot, Inc. (HD), Palo Alto Networks, Inc. (PANW).
Wednesday: eBay, Inc. (EBAY), The TJX Companies, Inc. (TJX), Nvidia Corporation (NVDA), Diamondback Energy, Inc. (FANG).
Thursday: Block, Inc. (SQ), Pioneer Natural Resources Company (PXD).
Friday: EOG Resources, Inc. (EOG).
Final Thoughts
The market is a little turbulent at the moment. I mentioned this last week. First, it ran up 6% last month. You don’t get 6% a month. It just doesn’t work that way. That doesn't mean we’ll flounder the rest of the year, but we may get some back and forth for a few more weeks. You also had a non-voting member of the Fed, James Bullard, jawbone about how they should push rates higher faster yet. This made the market nervous, but remember he’s a non-voting member, so essentially his opinion doesn’t count. The market will eventually figure this out.
While inflation continues to fall, the markets climb a wall of worry and nothing is more worrisome to stocks than runaway inflation and continuously higher interest rates. We’re close to the end of the rate hikes. Don’t believe me? Well, take a look at the cover of the Economist this week. They are notorious, from a sentiment standpoint, for ringing the bell with their magazine covers. What I mean is that by the time big publications like the Economist and Barron’s put something about the macroeconomy on their cover it is usually pretty close to the end of whatever phenomenon they are exploiting to sell issues.
Growing concerns about further interest rate hikes, prompted by fresh economic data, reversed early-week gains and left stocks mixed for the week. The Dow Jones Industrial Average slipped 0.13%, while the Standard & Poor’s 500 fell 0.28%. The Nasdaq Composite index advanced 0.59% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, gained 0.52%.
Rate Concerns Weigh on Stocks
Stocks opened last week higher on investor hopes that a continued cooling in inflation might support a more dovish Fed. A higher-than-expected rise in the Consumer Price Index (CPI) and strong retail sales in January initially did little to dent that enthusiasm, as stocks posted solid gains through Wednesday’s close. But that optimism faded on Thursday as a surprising rise in producer prices and another decline in initial jobless claims triggered worries the Fed would stay the course for longer. Comments from two Fed officials supporting a more aggressive rate hike stance added to the unease, erasing much of the week’s gains. Stocks ended mixed on Friday, capping a choppy week.
Inflation Moderation Pauses
Consumer prices climbed 0.5% in January, fueled by rising shelter costs and energy prices. The increase in the CPI was higher than the 0.1% rise in December and slightly above the consensus estimates of 0.4%. The year-over-year inflation number (6.4%) came in lower than December’s 12-month rise of 6.5%, making it the seventh consecutive month of declining year-over-year inflation. January’s product price report showed a surprise 0.7% increase, higher than the 0.4% rise expected by economists and the biggest jump since June. Year-over year, producer prices rose 6.0%, a slight improvement from December’s number.
This Week: Key Economic Data
Tuesday: Purchasing Managers’ Index (PMI) Flash. Existing Home Sales.
Wednesday: FOMC Minutes.
Thursday: Jobless Claims. Gross Domestic Product (GDP).
Friday: New Home Sales. Consumer Sentiment.
This Week: Notable Companies Reporting Earnings
Tuesday: Walmart, Inc. (WMT), The Home Depot, Inc. (HD), Palo Alto Networks, Inc. (PANW).
Wednesday: eBay, Inc. (EBAY), The TJX Companies, Inc. (TJX), Nvidia Corporation (NVDA), Diamondback Energy, Inc. (FANG).
Thursday: Block, Inc. (SQ), Pioneer Natural Resources Company (PXD).
Friday: EOG Resources, Inc. (EOG).
Final Thoughts
The market is a little turbulent at the moment. I mentioned this last week. First, it ran up 6% last month. You don’t get 6% a month. It just doesn’t work that way. That doesn't mean we’ll flounder the rest of the year, but we may get some back and forth for a few more weeks. You also had a non-voting member of the Fed, James Bullard, jawbone about how they should push rates higher faster yet. This made the market nervous, but remember he’s a non-voting member, so essentially his opinion doesn’t count. The market will eventually figure this out.
While inflation continues to fall, the markets climb a wall of worry and nothing is more worrisome to stocks than runaway inflation and continuously higher interest rates. We’re close to the end of the rate hikes. Don’t believe me? Well, take a look at the cover of the Economist this week. They are notorious, from a sentiment standpoint, for ringing the bell with their magazine covers. What I mean is that by the time big publications like the Economist and Barron’s put something about the macroeconomy on their cover it is usually pretty close to the end of whatever phenomenon they are exploiting to sell issues.
Have a good week!
