WEEKLY SUMMARY: S&P 500 winning streak stopped; Bitcoin hit $52k
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. Futures market ended the week pricing in only a 10.5% chance of a rate cut in March compared with a 65.1% chance a month earlier. The 10-year U.S. Treasury also surged to an intraday high of 4.33% on Friday, its highest level since December 1. The STOXX Europe 600 Index ended the week 1.39% higher as signs of cooling inflation and a better outlook for interest rate cuts cheered investors. In Japan, the Nikkei 225 Index gained 4.3% over the week. Financial markets in mainland China were closed for the week. Oil prices rallied for the 4th week of the last 5, with WTI back above $79 and its highest close since November...Bitcoin hit $52,000, its highest since November 2021.
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US equities gave back a portion of the previous week’s gains, as uncertainty over the incoming administration’s policies appeared to continue driving the so-called Trump Trade. Financials and energy shares continue to benefit from hopes for deregulation and merger approvals. Likewise, the price of Bitcoin had surged by nearly a third since the eve of the election, as investors anticipated looser regulation of digital currencies. Conversely, health care shares fell sharply following news that Robert F. Kennedy, Jr., would be Trump’s nominee to head the Health and Human Services Department (HHS). On the macro side, yoy US headline inflation rose for the 1st time since March, from 2.4% to 2.6%. PPI data came in above expectations.