Stocks Mixed
The major U.S. stock indexes rose more than 1% on Monday but struggled to maintain positive momentum as new data on inflation cast a pall over the market. For the week, the S&P 500 slipped 0.2% on a total return basis, the Dow was essentially flat, and the NASDAQ added 0.6%.
Mixed readings on inflation fueled concerns that the U.S. Federal Reserve may extend its rate-hiking cycle longer than expected. Tuesday’s Consumer Price Index release showed a smaller-than-expected decline to an annual inflation rate of 6.4%; a separate report on Thursday indicated that prices charged by industrial suppliers rose more than had been forecast.
The latest data on inflation pushed the yields of 2- and 10-year U.S. Treasury bonds to their highest levels in more than three months. The 2-year’s yield rose to 4.61% on Friday while the 10-year’s yield was 3.83%—maintaining a yield curve inversion, with short-term debt yielding more than long-term debt.
After declining the previous two months, U.S. retail sales in January rose 3% on a seasonally adjusted basis—the largest monthly increase in nearly two years. In November and December, sales dropped around 1%.
Earnings continued to be subpar, with fourth-quarter results now released for more than 80% of the companies in the S&P 500. As of Friday, earnings were expected to decline 4.7% compared with the same quarter a year ago, based on companies that have reported as well as forecasts for firms that haven’t yet reported.
The price of natural gas in Europe fell on Friday to the lowest level since late 2021, extending a decline that began late last summer and continued as temperatures remained relatively mild through the first half of winter. Earlier in 2022, many Europeans had feared that the war in Ukraine could trigger an energy crisis across the continent this winter.
The price of Bitcoin, the most widely traded cryptocurrency, climbed around 14% for the week and rose above $24,000 for the first time since last August. As recently as 3 months ago, Bitcoin was trading below $16,000; 10 months ago, it traded as high as $48,000.
An update of the U.S. Federal Reserve’s preferred gauge for tracking inflation is scheduled for Friday. In the most recent release on January 27, the government reported that its Personal Consumption Expenditures Price Index rose at an annual 5.0% rate in December, down from 5.5% the previous month. Excluding food and energy, prices rose at a 4.4% annual rate—the lowest in 14 months.
Source: John Hancock Investment Management
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