Market Perspective for February 11, 2024

The first full week of February was a relatively quiet one in terms of news, but the information that did come out had a significant impact on markets. It will also likely have an impact on what the Fed decides to do in March and beyond in relation to interest rates. At the beginning of the week, there was chatter that a March rate cut was looking less likely, but a revision to a key January report might change that.

Last Sunday night, a 60 Minutes interview featuring Fed Chairman Jerome Powell revealed some key insight into his thinking. He said that there were likely to be three rate cuts in 2024 with the first one likely coming in May. During the interview, he also reiterated that the risk of a recession was still low and that the economy was still solid despite the rapid rise of interest rates over the past couple of years.

On Monday morning, the ISM Services PMI report was released and came in at 53 percent. This was higher than the 50.6 percent from last month and the analyst estimate of 52 percent prior to the release. This reading indicates that the service sector is still growing and may be a key part of economic stability and growth during the rest of the calendar year.

On Thursday morning, unemployment claims numbers were released and revealed that 218,000 people sought benefits during the previous seven days. This was lower than the estimated 221,000 claims and lower than the 227,000 claims made last week.

Although there were no scheduled news releases on Friday, an important revision was announced. It was reported that the December inflation report, which was released on Jan. 11, was revised downward from .3 percent to .2 percent on a monthly basis. The new figure was in line with what analysts had expected when the report was released.

The change will have a negligible impact on annual CPI figures, but it may help to calm the nerves of those who may have thought that the inflation fight wasn’t over. It is worth noting that November’s inflation report was revised upward from .1 percent to .2 percent on a monthly basis.

On Feb. 13, the January CPI report will be released, which is expected to confirm that inflation is moderating in the short-term and decelerating in the longer run. Analysts expect that monthly CPI will be .2 percent while yearly CPI will fall from 3.4 percent to 2.9 percent.

Markets had another up week as the Dow finished .35 percent higher to close at 38,671. On Monday, the Dow reached a low of 38,263 and made a high of 38,727 on Wednesday.

The Nasdaq was up 2.45 percent this week to finish at 15,990, which is an all-time high for the index primarily comprised of tech stocks. It would make a low of 15,475 on Monday before rebounding, climbing the rest of the week and closing at its weekly high.

Finally, the S&P 500 finished the week up 1.49 percent to finish at 5,026. As with the Nasdaq, the S&P would make its weekly low of 4,919 on Monday before reversing, climbing and finishing at its weekly high.

In international news, Australia’s central bank decided to hold its interest rate steady at 4.35 percent. However, unlike in the United States, the Royal Bank of Australia (RBA) has warned that interest rates could still go higher if data warrants. On Wednesday night, it was revealed that the inflation rate fell .8 percent on an annualized basis while prices fell 2.5 percent on an annualized basis. On Friday, Canada’s central bank revealed that the unemployment rate there fell to 5.7 percent from 5.9 percent last month.

The CPI report will be released Wednesday. Retail sale data will be released on Thursday with the belief that sales fell by .2 percent over the past month. That would be a steep decline from a .6 percent increase in December. Friday sees the release of PPI data with the expectation that prices increased .1 percent on a month basis in January. Finally, the University of Michigan will release its consumer sentiment and inflation expectation reports on Friday.

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