The past week brought some surprising economic data, with inflation running hotter than expected and retail sales experiencing a sharp decline. Meanwhile, tech stocks, led by Nvidia and Apple, rebounded while Treasury yields held steady. Let’s break it all down.
The past week brought some surprising economic data, with inflation running hotter than expected and retail sales experiencing a sharp decline. Meanwhile, tech stocks, led by Nvidia and Apple, rebounded while Treasury yields held steady. Let’s break it all down.
Is Inflation Making a Comeback?
Recent reports on both consumer and producer prices suggest inflation might not be cooling as quickly as hoped. The Consumer Price Index (CPI) and Producer Price Index (PPI) both exceeded expectations:
- CPI (Consumer Inflation): Prices rose 0.5% in January, higher than the expected 0.3%.
- PPI (Producer Inflation): Prices increased 0.4%, also exceeding forecasts.
The takeaway? The Federal Reserve may need to tread carefully when considering interest rate cuts, as inflation concerns are back in focus.
Retail Sales Drop Sharply
January retail sales fell 0.9%, marking the largest decline in over two years. Nine out of thirteen retail categories saw declines, signaling that consumers may be pulling back on spending. If this trend continues, it could impact economic growth in the coming months.
Tech Stocks Rebound—Thanks to Nvidia and Apple
Technology stocks led the market’s gains last week:
- Nvidia and Apple each surged over 6.9%, helping the Nasdaq Composite bounce back.
- Apple’s AI deal with Alibaba gave a boost to semiconductor stocks.
- Dell struck a $5 billion deal with Elon Musk’s xAI, adding to the sector’s momentum.
Meanwhile, international stocks also performed well, with the MSCI EAFE index rising 2.91%.
Treasury Yields Stay Flat
Despite the volatility in economic data, Treasury yields remained steady:
- The 2-, 5-, 10-, and 30-year yields all moved less than two basis points.
- Investors are watching the Federal Reserve for any signals on future rate moves.
What’s Coming Next?
This week’s key economic releases focus on housing and the Federal Reserve:
- Tuesday, February 18: The NAHB Housing Market Index will provide insight into homebuilder confidence.
- Wednesday, February 19: Housing starts, building permits, and FOMC meeting minutes will be released.
- Friday, February 21: Existing home sales data will reveal if the housing market is cooling.
Tom Hine is a CERTIFIED FINANCIAL PLANNER® professional and owner of Capital Wealth Management. He works with individuals and families on financial planning, retirement strategies, and investment management. With offices in Glastonbury and Wilton, CT, Tom serves clients across Connecticut and throughout the U.S. Connect with Tom
Disclosures: This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.
Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor’s. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index. The Bloomberg US Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The U.S. Treasury Index is based on the auctions of U.S. Treasury bills, or on the U.S. Treasury’s daily yield curve. The Bloomberg US Mortgage Backed Securities (MBS) Index is an unmanaged market value-weighted index of 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC), and balloon mortgages with fixed-rate coupons. The Bloomberg US Municipal Index includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than 2 years) selected from issues larger than $50 million. One basis point is equal to 1/100th of 1 percent, or 0.01 percent. One basis point (bp) is equal to 1/100th of 1 percent, or 0.01 percent.
This information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete, it is not a statement of all available data necessary for making an investment decision and it does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. Every investor's situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Any opinions are those of the author, and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice.