February 17, 2024

Weekly Market Commentary February 12th to February 16th 2024

In a week with many economic data releases, the most anticipated were key inflation measures that reaffirmed that the Federal Reserve will likely keep rates unchanged at their March meeting.

The Consumer Price Index (CPI) for the month of January came in above consensus for both the headline, up 0.3%, and core measure, up 0.4%. The year-on-year rise in prices was 3.1% headline and 3.9% core – excluding food and energy. Sticky shelter costs, which many economists anticipated would decline in 2024, continue to heavily influence this data set.

Retail Sales followed CPI with a surprise as well, decreasing 0.8% vs. -0.2% estimate in January and the largest monthly decline since March of last year, while both November and December were downwardly revised. The retail sales control group, utilized in the GDP calculation, decreased 0.4% vs an estimate of 0.2%. Weather and January seasonality were blamed for the big miss. While one month does not indicate a trend, it makes the February report that much more important.

On Friday, concerns rose further of an uptick in inflation on the heels of CPI earlier in the week, with Producer Price Index (PPI) increasing at a higher than anticipated rate. Headline PPI increased by 0.3% vs the 0.1% estimate, while year-on-year increased 0.9%, down slightly from 1.0% in the prior month. Core PPI increased by 0.5% vs the 0.1% estimate and increased by 2.0% year-over-year, above the prior month’s 1.7% reading. Similar to CPI, weather and seasonality were blamed.

After temporarily breaching a new all-time high, the S&P 500 closed the final trading session on Friday at 5,005 down 0.4% for the week and snapping a streak of five straight weeks of gains. A pullback in previously highflying technology stocks led the Nasdaq Composite lower by 1.3% for the week.

The 10-Year U.S. Treasury yield opened the week at 4.17% and closed higher at 4.28% due to the reinflation concerns. The 2-Year yield, which is more impacted by FOMC rate policy, opened the week at 4.47% and closed at 4.66%, increasing the 2/10 spread to -0.38%.

In next week’s holiday shortened trading week, notable releases include FOMC meeting minutes, U.S. services and manufacturing data and Existing Home Sales. Enjoy the President’s Day holiday.

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