EZBites~week ending February 16, 2024
LAST WEEK:
DOW:-0.1% (YTD:+2.5%)
NASDAQ:-1.3% (YTD:+5.1%)
S&P:-0.4% (YTD:+4.9%)
The US equity markets were mixed this week. Tuesday’s higher-than-expected consumer inflation reading sent stocks on a broad, sharp retreat.? By week's end, the S&P recovered from Tuesday’s lows due to good corporate earnings reports, ending the week with only a decline of -0.4%
The Russell 2000, for example, sank 4% on Tuesday, but ultimately settled 1.1% higher on the week. The Magnificent 7 had a rare bad week with a decline of 1.5%, while the equal-weighted S&P 500 rose by 0.7%.
Four of the 11 S&P 500 sectors closed lower, while five climbed more than 1.0%. The heavily-weighted information technology sector saw the sharpest drop, down 2.5%, followed by the Communication Services sector, which fell 1.6%. On the flip side, the Materials (+2.4%) and Energy (+2.2%) sectors saw the biggest gains.
Ultimately, investors overall were not materially spooked by this week's slate economic data, holding onto to hope that inflation will continue to fall, that the macro environment will remain steady, and that the Fed will still cut rates sooner rather than later.
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In addition to the hot CPI reading, investors digested a below-consensus Retail Sales report for January, an unexpected drop in jobless claims to 212,000, and a hotter-than-expected PPI report for January.? As a result, the 2-yr note yield rose 15 bp this week to 4.65%, and the 10-yr yield rose 11 bp to 4.30%.
There had been a growing sense that stocks were overbought in the short-term and due for some consolidation. The market has been on a huge run since late October that had the S&P 500 and Dow Jones Industrial Average near all-time highs coming into the week.
The move from 2023 Q4 lows were led by gains in mega-caps, so it makes sense that some mega-caps suffered outsized losses from profit-taking activity. The Vanguard Mega Cap Growth ETF (MGK) logged a 1.4% decline, Amazon (AMZN) and Microsoft (MSFT) dropping 2.8% and 3.9%, respectively (AMZN and MSFT are still up 11.6% and 7.5% in 2024). NVDA reports next week.
As a reminder, bond and equity markets are closed today for Presidents Day.
March EZTracker Newsletters come out ?Sunday, February 25, 2024