Market Summary – February 20, 2024

Last Week’s Summary

  • S&P 500 Index fell 0.35%
  • International Equities rose 1.61%
  • Emerging Markets rose 2.11%
  • U.S. 10-Year Treasury Yield rose to 4.27%
  • Initial Jobless Claims fell to 212k
  • CPI fell to 3.1%; Core remained at 3.9%
  • PPI fell to 0.9%; Core rose to 2.0%
  • U. of Mich. Sentiment rose to 79.6

What to Watch for This Week

  • T, 2/20/24 Leading Index
  • W, 2/21/24 MBA Mortgage Applications, FOMC Meeting Minutes
  • Th, 2/22/24 Initial Jobless Claims, S&P Global US Manufacturing PMI

Weekly Market Recap

Despite hitting new highs on Thursday, the S&P 500 ended its 5-Week Winning Streak as market participants speculate about the Federal Reserve’s cautious approach toward rate cuts. Although the Consumer Price Index fell, it surpassed estimates across the board, and the Producer Price Index similarly ticked down, however exceeded expectations in Friday’s reading.

On the other hand, the core PPI rose from 1.8% to 2%, underscoring the Fed’s challenges in reaching its 2% inflation target. Treasuries experienced a sell-off, with Two-Year Yields reaching their highest levels since before the Fed’s December “pivot.” Swap traders reduced their expectations for a central bank rate cut before June.

The VIX, known as the stock market’s “fear gauge,” saw its largest surge since November, where it has largely remained below 15. Fed Chair Jerome Powell and his colleagues have signaled a wait-and-see approach before considering policy easing. Two officials with voting power in 2024 expressed openness to three interest-rate cuts this year if inflationary trends persist.

San Francisco Fed President Mary Daly described this as a “reasonable baseline” expectation, while Atlanta’s Raphael Bostic stated he could envision three cuts, rather than his current preference for two, if inflation data improves. Given the Monday holiday, and shortened trading week, the market is largely relying on positive earnings releases to buoy the market given only a few meaningful economic releases.

FOMC meeting minutes from the first meeting this week are set to be released Wednesday, where market participants are hoping to gain insight into the minds of the Federal Reserve members and their thoughts toward rate hikes in the future.

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