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Written by Charles-Henry Monchau | Feb 25, 2023 8:15:44 AM

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WEEKLY SUMMARY: Stocks & Bonds battered by rates re-pricing

Several upside inflation and growth surprises in the US pushed the S&P 500 Index to its worst weekly loss since early December. At its close on Friday, the index had surrendered roughly 35% of the rally that began in October, but it remained up 3.4% year to date. The Dow Jones Industrial Average is now in negative territory for the year, however. Growth stocks fell only modestly more than value shares. The VIX jumped but remained a bit below its mid-December levels. Stocks fell sharply following worrisome signs that US inflation might have reversed course and accelerated again as the year began. The core (less food and energy) personal consumption expenditures (PCE) price index jumped 0.6% in January (vs. +0.4% expected). Additional data (consumer expectations, new home sales) suggested that both consumers and employers were yet to be deterred by rising interest rates. Meanwhile, a few major retailers (e.g Home Depot) reported disappointing earnings. The week’s data had a large impact on expectations for the timing and extent of future Fed rate hikes. They also sparked a jump in bond yields with the 10-year U.S. Treasury note nearing 4.00% for the first time since mid-November. Shares in Europe fell as better-than-expected economic data and corporate earnings raised the prospect that central banks might persist with interest rate increases. Chinese stocks advanced after three weeks of losses. Gold and Bitcoin dumped while the dollar rose.