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The S&P 500 Index hit new intraday highs, as did the Nasdaq Composite Index, which posted its biggest daily gain in about a year on Thursday, when NVIDIA added a record USD 277 billion to its market capitalization. The chipmaker reported strong quarterly revenue and earnings that topped Wall Street estimates. The pan-European STOXX Europe 600 Index climbed to a record level, ending the week 1.15% higher. Japanese equities ended Thursday at a new all-time high, with the Nikkei 225 Index breaking the previous record set more than 30 years ago in 1989. Chinese equities rallied as recovery hopes rose following buoyant holiday spending during the prior week’s Lunar New Year holiday. The Shanghai Composite Index rose 4.85%.
Some favorable earnings surprises balanced against discouraging inflation data left the major US equities indices mixed, with the S&P 500 Index recording its first weekly decline since the start of the year. The declines were concentrated in large-cap growth stocks, however, with an equally weighted version of the S&P 500 reaching a record intraday high on Thursday. Investors digested several upside inflation surprises during the week. On Tuesday, stocks sold off after US CPI data, up 0.3% MoM in January (vs. 0.2% expected). Core CPI rose 0.4% MoM, up 3.9% yoy, nearly double the Fed’s 2.0% target. Stock fell again on Friday as PPI increased 0.3% in January—the most in five months—after falling 0.1% in December. Core prices rose 0.5%, well above expectations of around 0.1%. Stagflation fears reappeared on Thursday as retail sales plummeted 0.8% in January.
The fixed income market is currently grappling with the concept of the "Last Smile," a term coined by Isabel Schnabel to encapsulate the intricacies encountered during the last stages of disinflation. Recent adverse movements in January's inflation and Producer Price Index (PPI) data have underscored the challenges of this phase, affecting market sentiment and dynamics.
The US economy demonstrates resilience with job creation, steady wage growth, and a 3.7% unemployment rate, while concerns mount over a potential deflationary spiral in China. Amidst geopolitical tensions reshaping global supply chains, the SEC's approval of the first Bitcoin spot ETF marks a significant foray into mainstream finance for cryptocurrencies. Each month, the Syz investment team takes you through the last 31 days in 10 charts.
Most of the major US #equity indexes moved higher over the week, with the S&P 500 Index reaching new highs and breaching the 5,000 threshold for the first time. The advance remained relatively narrow, however, with an equally weighted version of the index significantly trailing the standard market-weighted version for the fourth time in five weeks. #Nvidia soared and is now worth as much as the entire Chinese stock market (represented by the H shares of the Hong Kong stock market). Market sentiment was helped by the solid reception given to the U.S. Treasury Department’s record $42 billion auction of 10-year notes. Shares in New York Community Bank plunged after the lender reported weak results in the wake of its acquisition of failed Signature Bank during early 2023’s regional banking turmoil.
Recent macroeconomic data have led American and European central bankers to moderate their earlier optimistic projections, impacting bond markets. This recalibration, reflecting ongoing economic resilience, has prompted a reassessment of interest rate paths, contributing to heightened volatility and shifts in global fixed income landscapes.
US equity performance was mixed over the week as large-caps indices moved to intraday highs while small-caps and an equally weighted version of the S&P 500 Index recorded a modest loss. It was the busiest week of the Q4 earnings reporting season, with several releases from heavily weighted tech giants driving investors’ sentiment. Meta was the biggest winner of the week, up 20% on Friday. Meanwhile, Regional banks suffered their worst week since May 2023. On Wednesday, the Fed left short-term interest rates unchanged, as it was widely anticipated, but Fed Chair Jerome Powell stated that he didn’t think it’s likely that the Fed will cut rates in March. As a result, futures markets are now pricing in only a 20.5% chance of a rate cut in March, down from 47.7% the week before.
Following the FOMC meeting, Fed Chair Powell signaled the Fed's reluctance to cut rates in March, emphasizing the need for additional "confidence" in declining inflation figures. This careful stance reflects the ongoing robustness of the American job market, suggesting that a methodical approach is currently favored.