Market Perspective for February 18, 2024

The past week was a significant one for traders as several economic data points were released which provided some additional clarity if a rate cut was still on the table for the first few months of the year. While the prevailing narrative was that a rate cut was possible in March, it’s unlikely that one happens until May at the earliest.

On Tuesday, it was revealed that CPI was up .3 percent for the month, which was higher than the .2 percent estimate prior to the news release. The inflation rate was 3.1 percent on an annualized basis, which was higher than the 2.9 percent estimate. Housing costs were seen as the main culprit for the higher-than-expected figures, and it’s likely that housing costs will remain elevated even as prices in other areas of the market moderate.

Evidence of that moderation came on Thursday when it was revealed that retail sales on a monthly basis had dropped .8 percent as opposed to .2 percent as analysts had expected. Core retail prices dropped .6 percent on the month, which could be seen as an indication of consumer weakness. As consumer spending drives the market, a sustained drop may lead to a further drop in inflation even as housing costs remain elevated.

Also on Thursday, unemployment claims figures were released, and it was revealed that 212,000 people filed for benefits during the previous seven days. On Friday, the PPI figures showed a .3 percent increase in prices during the last month. This means that consumers were spending more for goods even though they were buying less of what they wanted or needed. Also on Friday, the University of Michigan released its consumer sentiment and inflation expectations reports. Consumer sentiment was at 79.6 percent, which is slightly lower than estimates prior to its release while inflation was expected to be at 3 percent 12 months from now.

The Dow was down 65 points this week to close at 38,627. On Monday, the market made a high of 38,908 before retreating to make a low of 38,055 on Tuesday. However, buyers would get back into the market and allow it to trend back toward the high the rest of the week.

Like the Dow, the Nasdaq would also finish the week in the red having lost 1.5 percent over the last five trading days. Also like the Dow, the Nasdaq would make a high on Monday before making a low on Tuesday. The high of the week was 16,063 while the low was 15,561.

Finally, the S&P 500 finished the week down .48 percent to finish at 5,005. On Monday, the market hit its low of 5,001 while its high of 5,037 was reached on Wednesday. The S&P would then spend the second half of the week in freefall as investors digested the mixed bag of economic news.

In international news, inflation reports were issued in Great Britain, Switzerland and New Zealand. In Great Britain, inflation came in at 4 percent for the year while prices went up by .2 percent on a monthly basis in Switzerland. New Zealand expects inflation to come in at 2.5 percent for the following quarter.

The upcoming week is expected to be another consequential one. On Wednesday, FOMC meeting minutes will be released, which are expected to reveal that the Fed is being cautious about cutting rates too soon. On Thursday, unemployment claim numbers as well as manufacturing and services PMI data will be released.

Outside of the United States, Canada will release its inflation figures for January on Tuesday and retail sales figures on Thursday. Australia will release its own central bank’s policy meeting minutes on Monday night while manufacturing and services data will be released Wednesday night from most of the European Union’s developed nations.

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