What's Happening?
The Dow Jones Industrial Average closed at 49,500.93, gaining 48.95 points or 0.1% on Friday, despite a weekly drop of 1.2%. The S&P 500 and Nasdaq Composite also saw declines of 1.4% and 2.1% respectively over the week. This performance comes after a softer-than-expected inflation report for January, where the consumer price index rose by 0.2% and core CPI, excluding food and energy, increased by 0.3%. Year-on-year, core CPI rose by 2.5%, marking the smallest gain in nearly five years. This data provided some relief to rate-sensitive sectors, although tech stocks remained under pressure. Bond yields fell, with the 10-year Treasury yield dropping to 4.05% following the CPI release.
Why It's Important?
The softer inflation data suggests a potential easing of monetary
policy, which could influence future interest rate decisions by the Federal Reserve. A 25-basis-point rate cut in June is currently seen as a 52.3% possibility. This could impact borrowing costs for businesses and consumers, affecting economic growth. The mixed performance of Dow components, with companies like Nike and UnitedHealth gaining while Apple and Visa lagged, highlights the market's uncertainty. The upcoming economic data releases, including the Empire State manufacturing index and Fed minutes, will be crucial in shaping market expectations and the Fed's policy direction.
What's Next?
With the NYSE closed for Washington's Birthday, the market will focus on upcoming economic indicators. Key data releases include the Empire State manufacturing index, NAHB housing market index, and Fed minutes. Additionally, Walmart's fiscal fourth-quarter earnings are anticipated, which could provide insights into consumer spending trends. The first estimate of fourth-quarter GDP and the core PCE price index, a key inflation measure for the Fed, will also be released, potentially influencing market sentiment and Fed policy decisions.
