Weekly review

This week brought mixed movements in the stock market, with significant volatility observed. Tuesday saw widespread declines following the release of higher-than-expected Consumer Price Index (CPI) and core CPI for January, leading to notable increases in Treasury yields. However, by the week's end, major indices managed to recover much of the lost ground. Despite a 4% drop on Tuesday, the Russell 2000 ultimately ended the week 1.1% higher. While the market-cap weighted S&P 500 decreased by 0.4%, the equal-weighted S&P 500 saw a 0.7% increase. Among the S&P 500 sectors, only four closed lower, while five saw gains exceeding 1%. The technology sector experienced the most significant decline, down 2.5%, followed by a 1.6% drop in the communication services sector. Conversely, the materials and energy sectors recorded the largest gains at 2.4% and 2.2%, respectively. Despite concerning economic data, including below-consensus retail sales and a hotter-than-expected Producer Price Index (PPI) for January, the market remained relatively unfazed, holding onto hopes for favorable inflation trends, continued macroeconomic strength, and potential rate cuts by the Federal Reserve. Additionally, there was a growing sentiment among some market participants that stocks were overbought in the short term and overdue for consolidation. This week also witnessed profit-taking activity, particularly in the mega-cap space, with notable declines in stocks like Amazon and Microsoft. However, despite these losses, both companies maintained year-to-date increases.

Monday saw a robust performance in the stock market, with many stocks closing higher, reflected in the positive market breadth. Advancers outnumbered decliners significantly at both the NYSE and Nasdaq, with the Dow Jones Industrial Average reaching another record closing high with a gain of 0.3%, while the Russell 2000 surged by 1.8%, continuing its recent strong performance. However, some mega-cap stocks experienced profit-taking, leading to slight declines in the S&P 500 (-0.1%) and Nasdaq Composite (-0.3%). Notable losers from the mega-cap space included Amazon and Microsoft. Semiconductor stocks also weakened after an initial surge, exerting downward pressure on major indices. Despite concerns about a potential pullback, sectors like energy performed well, with a 1.1% gain, primarily driven by Diamondback Energy's significant increase following news of its merger with Endeavor Energy Resources. Monday's economic data, including the January Treasury Budget, showed a deficit of $22.0 billion, primarily due to higher outlays exceeding receipts, reflecting the impact of higher interest rates and increased issuance to fund the government's chronic budget deficit.

Tuesday, however, marked a significant retreat in the stock market as investors reacted to higher-than-expected inflation data. Both the stock and bond markets experienced selling pressure following the release of a hotter-than-expected CPI and core CPI for January. The S&P 500 fell by 1.4%, the Nasdaq Composite by 1.8%, and the Dow Jones Industrial Average dropped by 500 points. The Russell 2000 lagged behind other major indices, plummeting by 4.0%, primarily due to weakness in regional bank shares, which came under renewed selling pressure despite recent rebound activity. This weakness also led to a 4.2% loss in the SPDR S&P Regional Banking ETF (KRE). Concerns about growth in a high-interest-rate environment contributed to small-cap underperformance. With ten of the 11 S&P 500 sectors experiencing declines of at least 1.0%, the market sentiment remained cautious. Tuesday's economic data, including the January NFIB Small Business Optimism and CPI, provided further support for a hawkish stance from Fed officials, potentially delaying discussions about an initial rate cut.

Wednesday showcased a strong performance in the stock market, building upon the rebound initiated after Tuesday's sell-off triggered by the CPI data. The Russell 2000 notably outperformed, bouncing back with a 2.4% gain following its 4.0% decline on Tuesday. A late surge in buying activity propelled the S&P 500 to a 1.0% gain, reaching the 5,000 mark, despite initially testing Tuesday's closing level. The market demonstrated resilience to selling pressures, with a noticeable decrease in interest rates and ongoing optimism about potential rate cuts stimulating buying activity. Nine of the 11 S&P 500 sectors closed higher, with Lyft soaring by 35% after reporting positive earnings and expectations for improved FY24 adjusted EBITDA margin, albeit with a minor correction in its earnings press release. Economic data on Wednesday was not significant.

Thursday witnessed continued rebound action in the stock market, initiated late on Tuesday following the CPI-driven sell-off. Despite some profit-taking activity, which affected heavily weighted stocks and limited index-level movements for the S&P 500 and Nasdaq Composite, both indices ended higher, with the S&P 500 surpassing Monday's close. The Russell 2000, with a 2.4% jump, fully recovered from its 4% decline on Tuesday. The information technology sector of the S&P 500 was the only sector to close in negative territory, declining by 0.4%, with Cisco experiencing notable losses after issuing a disappointing outlook. A slight decrease in interest rates provided some support to the stock market on Thursday, although Treasuries retreated from their highs following a series of economic releases. These releases included retail sales data for January, which showed a decline, particularly in spending on goods, despite some attributing it to severe weather conditions. Additionally, initial jobless claims decreased, indicating a healthy economy despite challenges in finding new jobs after layoffs. Import and export prices increased month-over-month, while the New York Empire State Manufacturing Index and the Philadelphia Fed Index showed mixed results for February. Total industrial production decreased slightly in January, largely influenced by weather-related issues, and business inventories increased in December. The NAHB Housing Market Index improved in February, while weekly EIA Natural Gas Inventories showed a draw.

Friday saw the stock market mostly maintaining its position, showing little change from Thursday's closing levels. Despite another significant inflation report in the form of January PPI and a rise in Treasury yields, stocks didn't exhibit much reaction initially. However, in late afternoon trading, the major indices took a sudden downturn, closing near session lows without a specific catalyst driving the decline, though it was less severe compared to Tuesday's post-CPI slide. Nevertheless, market participants remained unperturbed by Friday morning's economic data, holding onto optimism regarding inflation trends, macroeconomic strength, and potential rate cuts by the Fed. The economic data released on Friday included figures for January Housing Starts and Building Permits, indicating weakness concentrated in multi-family starts and permits, with single-family starts down by 4.7%, affecting the housing market constrained by inventory shortages. Additionally, January's PPI exceeded expectations, with the core PPI indicating a similar trend to the previous CPI report, suggesting that while the market might downplay the report due to seasonal adjustment factors, the Fed is unlikely to do so and may view it as a reason to maintain patience in cutting rates. The University of Michigan's Consumer Sentiment Index for February came in slightly higher than expected, indicating improved consumer confidence in the economy with easing inflation pressures and continued labor market strength.

Throughout the week, various indices and indicators showed a mix of performance. The TSX closed at 21,256, reflecting a 1.2% increase for the week and a 1.4% increase year-to-date (YTD). Conversely, the Dow Jones Industrial Average ended the week at 38,628, marking a slight decrease of 0.1% for the week, although it still showed a 2.5% increase YTD. The S&P 500 Index closed at 5,006, experiencing a 0.4% decline for the week, with a YTD growth of 4.9%. Similarly, the NASDAQ saw a weekly decline of 1.3%, closing at 15,776, yet it showed a YTD increase of 5.1%. The MSCI EAFE showed a positive weekly performance, closing at 2,238 with a 0.6% increase, though its YTD growth was minimal at 0.1%. In the bond market, bonds experienced a slight decline of 0.5% for the week, resulting in a YTD decrease of 1.6%. Canada Investment Grade Bonds remained steady for the week but showed a YTD decline of 2.5%. Oil prices continued their upward trend, with a 1.8% increase during the week, reaching $78.25 per barrel, and showing a significant YTD growth of 9.2%.

Previous update:

The stock market experienced another successful week, marked by notable gains across various sectors. Small cap stocks showed a resurgence, with the Russell 2000 index climbing 2.4%. Additionally, the S&P 500 surpassed the 5,000 mark for the first time, buoyed by strong performances in mega cap and semiconductor stocks. Both the Vanguard Mega Cap Growth ETF (MGK) and the PHLX Semiconductor Index (SOX) saw significant increases of 2.6% and 5.3% respectively. Despite concerns about overvaluation, the market continued its upward trajectory, supported by widespread buying activity. Positive earnings reports from companies like Ford, Eli Lilly, DuPont, Arm Holdings, and Walt Disney contributed to the market's bullish sentiment, while others such as Amgen and PayPal faced challenges. Treasury yields saw notable increases, attributed to robust economic data and comments from Fed Chair Jerome Powell indicating a cautious approach to rate cuts. Strong performances in the services sector, coupled with favorable CPI revisions, further reinforced the market's confidence. However, Treasuries did not respond positively to strong auction results, reflecting lingering uncertainty regarding future monetary policy decisions. Despite slight shifts in rate cut expectations, the probability of a 25 basis points rate cut at the May FOMC meeting remains relatively high, albeit slightly lower than the previous week.

Monday saw widespread declines in the stock market, initially triggered by a surge in Treasury yields following the release of 10:00 ET economic data. Although major indices dipped to session lows early on, the market managed to recover some ground later in the day, supported by strength in select mega cap and semiconductor stocks. The PHLX Semiconductor Index (SOX) notably rose by 1.2%, propelled in part by ON Semiconductor's favorable earnings and guidance. However, despite gains in the information technology sector, with the S&P 500 IT sector posting a 0.6% increase, overall market sentiment remained subdued. The materials sector experienced the most significant decline, dropping 2.5% due to disappointing earnings from Air Products (APD). Market movements were largely influenced by fluctuations in Treasury prices, which have been declining amid strong economic data, prompting a reassessment of rate cut expectations. Federal Reserve Chair Jerome Powell's remarks on 60 Minutes regarding the need for sustained evidence of inflation reaching the 2% target before considering rate cuts further contributed to market uncertainty. The release of January's ISM Services PMI indicated an acceleration in sector activity, with increased new orders, employment, and prices, suggesting a robust economic environment less conducive to rate cuts.

On Tuesday, the stock market rebounded, with advancing issues outnumbering declining ones by a significant margin. However, the S&P 500 and Nasdaq Composite experienced some volatility, partly due to losses in heavily weighted components. Mega caps and semiconductor shares, which had previously outperformed, faced profit-taking pressure, leading to weakness in the information technology sector and a 1.1% decline in the PHLX Semiconductor Index. Despite these setbacks, the materials sector saw a notable 1.7% gain, largely driven by DuPont's positive earnings report. In corporate news, New York Community Bank (NYCB) witnessed a sharp decline following reports of regulatory pressure to cut its dividend. Notably, there were no significant US economic data releases on Tuesday.

Wednesday saw continued concerns about the stock market being perceived as overbought and overvalued, prompting expectations for a pullback that didn't materialize. Instead, major indices managed to advance, bolstered by strong performances from mega-cap stocks and their resilience to selling pressure. The market also received a boost from notable earnings-driven moves in companies like Enphase Energy, Emerson Electric, Chipotle Mexican Grill, Ford, and CVS Health. However, Dow component Amgen experienced a decline following its earnings report. Economic data for the day showed an increase in the MBA Mortgage Applications Index and a widening trade deficit in December, with both exports and imports seeing growth. Consumer credit expanded by a modest amount in December, with revolving and nonrevolving credit both experiencing increases, albeit at a slower pace, reflecting banks tightening lending standards and decreased demand for credit amid rising interest rates.

Thursday proved to be another positive day for the stock market, with the Russell 2000 leading gains, rising 1.4% by the session's end. Despite concerns about a potential pullback, selling pressure remained subdued, contributing to overall market optimism. While most of the market saw modest gains, individual stocks with earnings reports generated significant movements. Arm Holdings surged nearly 50% after reporting earnings, while Walt Disney also posted strong gains on favorable quarterly results. Conversely, PayPal faced selling pressure due to disappointing guidance. Treasury yields fell despite a robust $25 billion 30-year bond offering, influenced in part by the weekly jobless claims report showing a decrease in claims, aligning with the market's belief that the Fed may maintain a restrictive stance for longer. Additionally, December's wholesale inventories showed a modest increase, in line with expectations.

On Friday, the S&P 500 achieved a milestone by closing above 5,000 for the first time, marking a notable broad-based advance in the market. Despite concerns about overbought conditions, there was a notable absence of significant selling pressure, which actually served as a catalyst for further upside. Support from the semiconductor and mega-cap sectors also contributed to the market's positive momentum. However, the consumer staples sector underperformed, declining by 0.9%, largely due to PepsiCo's shares dropping 3.6% following their earnings report. While there were no significant U.S. economic releases on Friday, attention was drawn to the annual CPI revisions released at 8:30 ET. These revisions, although relatively favorable as they did not significantly alter the market's inflation outlook, garnered attention for their potential implications on the Fed's rate cut trajectory. Despite this, reactions from both the bond and equity markets were subdued.

The TSX closed at 21,006, experiencing a slight decrease of 0.4% for the week but maintaining a modest increase of 0.2% year-to-date. Meanwhile, the Dow Jones Industrial Average remained unchanged at 38,672 for the week, with a year-to-date growth of 2.6%. The S&P 500 Index showed a notable increase of 1.4% for the week, reaching 5,027, and achieving a year-to-date growth of 5.4%. NASDAQ also saw significant growth, rising by 2.3% to 15,991 for the week, with a year-to-date increase of 6.5%. The MSCI EAFE closed at 2,223, with no change for the week and a slight year-to-date decrease of -0.6%. The 10-year Treasury Yield stood at 4.16%, showing a slight increase of 0.1% for the week and a 0.3% increase year-to-date. The 10-year GoC Yield experienced a 0.2% increase for the week, reaching 3.54%, and a year-to-date increase of 0.4%. Oil prices surged by 5.9% to $76.56 per barrel for the week, with a year-to-date increase of 6.9%. However, bond prices, represented by Bonds at $97.62, faced a decline of 0.9% for the week, resulting in a year-to-date decrease of -1.3%. Similarly, Canadian Investment Grade Bonds showed a 0.9% decrease for the week and a year-to-date decrease of -2.4%. The Canadian/USD Exchange remained relatively stable at $0.74, with a slight decrease of -0.1% for the week and a year-to-date decrease of -2.0%.

Previous update:

The market experienced a dynamic week of news and earnings results, culminating in the S&P 500 and Dow Jones Industrial Average reaching fresh all-time highs on Friday. While major indices recorded gains, the Russell 2000, representing small-cap stocks, underperformed due to weaknesses in regional bank stocks. New York Community Bank (NYCB) reported a substantial increase in its provision for credit losses in Q4, totaling $552 million, primarily attributed to higher net charge-offs and concerns related to the office sector and potential repricing risk in the multi-family portfolio. NYCB's decision to cut its dividend by 70% to $0.05 per common share to enhance capital further impacted regional banks, reminiscent of last year's fallout. The SPDR S&P Regional Banking ETF (KRE) dropped 7.2% during the week.

In contrast, mega-cap stocks demonstrated strength, outperforming the broader market following influential earnings reports. Alphabet (GOOG) and Microsoft (MSFT) reported results on Tuesday, with GOOG experiencing a 6.7% decline, while MSFT climbed 1.8%. On Thursday, Apple (AAPL), Amazon (AMZN), and Meta Platforms (META) reported earnings, resulting in a 3.4% decline for AAPL, an 8.0% jump for AMZN, and a 20.5% gain for META. These major names collectively constitute nearly a quarter of the S&P 500, contributing to the Vanguard Mega Cap Growth ETF (MGK) climbing 2.1% during the week. Boeing (BA), a Dow component, reported earnings and recorded a 1.9% gain, though it remains down nearly 20% for the year due to the grounding of 737 Max 9 planes.

The week's price action was also influenced by a recalibration of rate cut expectations following robust economic data and the FOMC decision on Wednesday. While the committee voted to maintain the target range for the fed funds rate at 5.25-5.50%, the market hoped for a dovish shift in rhetoric. The FOMC's statement indicated a cautious approach, stating that a rate cut would be considered only when there is greater confidence in inflation moving sustainably toward 2 percent. This contributed to a broad market selloff on Wednesday. Furthermore, the unexpectedly strong January Employment Situation Report on Friday, featuring significant upside surprises in payroll growth and average hourly earnings, prompted a reassessment of the probability of a March rate cut. Fed Chair Powell expressed skepticism about a March rate cut, leading to a repricing in the fed funds futures market. Consequently, the 2-year note yield declined to 4.38%, and the 10-year note yield fell to 4.03% in response to the rate cut rethink and the Treasury Department's Q1 borrowing estimate of $760 billion, $55 billion below the October forecast. Borrowing in Q2 is expected to reach $202 billion.

On Monday, the S&P 500 reached a new record high, closing with a 0.8% gain, while the Dow Jones Industrial Average rose by 0.6%, the Nasdaq Composite climbed 1.1%, and the Russell 2000 jumped 1.7%. At the NYSE, advancers outnumbered decliners 5-to-2, and the Nasdaq saw a better than 2-to-1 lead in favor of advancers. The afternoon surge in buying activity was attributed to positive reactions to the Treasury Department's first quarter borrowing estimate. The Treasury Department's plan to borrow $760 billion in Q1, $55 billion below the October forecast, influenced market sentiment positively. Monday's trade exhibited a modestly positive bias even before the refunding estimate, supported by the outperformance of mega-cap stocks. Despite geopolitical concerns following a drone attack by an Iranian-backed militant group on a U.S. outpost in Jordan, which resulted in casualties, oil prices declined, signaling limited market concerns about supply disruptions.

On Tuesday, market sentiment lacked conviction, with negative market breadth and below-average volume at the NYSE. The Dow Jones Industrial Average closed with a 0.4% gain, while the S&P 500 (-0.1%) and Nasdaq Composite (-0.8%) experienced losses. Relative weakness in mega-cap and semiconductor-related stocks contributed to the S&P 500 and Nasdaq Composite declines, with participants awaiting earnings results from influential names in these sectors. The mixed market action was also influenced by a wait-and-see approach ahead of the FOMC decision on Wednesday, with expectations of unchanged rates but keen interest in any tonal shifts in rhetoric during Fed Chair Powell's press conference. Economic data on Tuesday included the November FHFA Housing Price Index (0.3%), November S&P Case-Shiller Home Price Index (5.4%), and January Consumer Confidence (114.8), all contributing to a mixed market sentiment. Additionally, the December JOLTS - Job Openings reported 9.026 million, indicating a positive outlook for continued strength in consumer spending, supported by factors such as slower inflation, expectations of decreasing interest rates, and favorable employment conditions.

On Wednesday, major indices closed at or near their day's lowest levels, with the Dow Jones Industrial Average falling by 0.8%, the S&P 500 declining 1.6%, the Nasdaq Composite logging a 2.2% loss, and the Russell 2000 sinking 2.5%. Although the beginning of the week saw lighter volume at the NYSE, it increased on Wednesday as market participants responded to the latest move by the FOMC. The committee voted unanimously to leave the target range for the fed funds rate unchanged at 5.25-5.50%, as expected. However, the market was anticipating a shift in rhetoric regarding the Fed's rate cut path, but the directive stated that it wouldn't be appropriate to reduce the target range until greater confidence is gained that inflation is moving sustainably toward 2 percent. During his press conference, Fed Chair Powell reiterated this view, expressing skepticism about a March rate cut. Initially, mega-cap losses had a disproportionate impact on index performance, but the broader market held up reasonably well. Wednesday's economic data included the Weekly MBA Mortgage Applications Index (-7.2%), January ADP Employment Change (107K, below the consensus of 140K), and Q4 Employment Cost Index (0.9%, slightly below the consensus of 1.0%). The disinflation in employment costs aligns with the softening inflation trends signaled by the core-PCE Price Index for December.

On Thursday, stocks rebounded strongly, with the Dow Jones Industrial Average (+1.0%) recovering from the previous day's retreat triggered by the FOMC, closing near its daily high. The S&P 500 (+1.3%), Nasdaq Composite (+1.3%), and Russell 2000 (+1.4%) also posted solid gains, with mega-cap stocks influencing index performance ahead of influential earnings reports. Despite brief interruptions due to renewed weakness in regional bank stocks and losses in New York Community Bank (NYCB) shares, stocks regained upside momentum. Economic data on Thursday included Weekly Initial Claims (224K), Weekly Continuing Claims (1.898 million), Q4 Productivity-Prel (3.2%), Q4 Unit Labor Costs-Prel (0.5%), January S&P Global US Manufacturing PMI - Final (50.7), December Construction Spending (0.9%), and January ISM Manufacturing Index (49.1%). The labor market conditions softened, and unit labor costs showed a tame increase, considered an inflation-friendly signal for the Fed. Construction spending was solid, indicating activity in both private and public sectors, and the ISM Manufacturing Index hovered near the breakeven mark of 50.0%, aligning with the market's soft landing outlook.

On Friday, the S&P 500 (+1.1%) and Dow Jones Industrial Average (+0.4%) achieved new record closing highs, while the Nasdaq Composite gained 1.7%, settling near its daily high. However, the advance-decline line was negative at both the NYSE and Nasdaq, and the equal-weighted S&P 500 experienced a 0.1% decline. Meta Platforms (META) and Amazon (AMZN) led index-level upward movements with significant gains following favorable earnings reports, even though Apple (AAPL) briefly turned positive after being down approximately 4% due to a relatively disappointing outlook for fiscal Q2 iPhone sales. The underlying negative bias beneath the index surface was attributed to the release of the stronger-than-expected Employment Situation Report for January. This report featured a notable increase in payroll growth and average hourly earnings. Despite the strong employment report, the market's hope for a sooner and more substantial rate cut from the Federal Open Market Committee (FOMC) was dampened. Consequently, the fed funds futures market adjusted the probability of a 25-basis points rate cut at the March FOMC meeting to 20.5%, down from 38.0% the previous day and 47.6% a week ago. The probability of a similar rate cut at the May FOMC meeting also decreased to 74% from 93.8% the previous day. The jobs report led to higher Treasury yields, contributing to the overall negative sentiment in the stock market. Friday's economic data included the January employment report, which exceeded expectations in key metrics, although it presented some quirks, such as a notable drop in the average workweek and benchmark revisions impacting nonfarm payroll employment. Despite these quirks, the report is likely to align with the Fed's current base case, considering a March rate cut as unlikely. The final reading for the University of Michigan Consumer Sentiment Index in January was 79.0, beating the consensus of 78.8. This increase in sentiment reflects an improved view of inflation and personal incomes, suggesting positive implications for consumer spending activity. Factory orders increased 0.2% month-over-month in December, slightly below the consensus of 0.3%, but continued business spending growth in December is considered a positive factor supporting the market's soft landing view.

Closing the week, the TSX edged down by 0.2%, posting a year-to-date gain of 0.6%. Meanwhile, the Dow Jones Industrial Average marked a 1.4% increase, contributing to a year-to-date growth of 2.6%. The S&P 500 Index also recorded a 1.4% rise, resulting in a 4.0% gain for the year so far. The NASDAQ experienced a 1.1% uptick, bringing its year-to-date performance to 4.1%. The MSCI EAFE* index showed a modest 0.4% increase, but it has a slight year-to-date decrease of -0.2%. The 10-year Treasury Yield saw a marginal 0.1% year-to-date rise, closing at 4.02%. On the other hand, the 10-year GoC Yield had a slight dip of 0.2%, but it maintained a year-to-date growth of 0.3%. Oil prices faced a weekly decline of 7.2%, settling at $72.37 per barrel, yet still holding a year-to-date gain of 1.0%. Bonds, represented by the index at $98.46, increased by 0.4%, reflecting a matching year-to-date growth. Canada Investment Grade Bonds* showed a 1.9% year-to-date increase but experienced a weekly decrease of -0.7%. The Canadian/USD Exchange remained stable at $0.74, showing no change for the week and a year-to-date decrease of -2.0%.

Previous update:

This week saw the stock market making gains, propelling the S&P 500 to new record highs. The increase in gains was more widespread compared to the previous week, which saw the outperformance of mega-cap stocks. Both the market-cap weighted S&P 500 and the Invesco S&P 500 Equal Weight ETF (RSP) posted a 1.1% climb this week. The broadening buying activity resulted in eight out of the 11 S&P 500 sectors experiencing gains. The energy sector saw the largest increase, rising by 5.2%, followed by a 4.5% gain in the communication services sector. The consumer discretionary sector was the notable laggard, facing a 1.4% decline, primarily due to Tesla's disappointing earnings and guidance, leading to a 13.6% drop in its shares. Microsoft, on the other hand, stood out among mega-cap stocks, reaching a market cap exceeding $3 trillion for the first time this week.

Several companies, including Humana, 3M, Johnson & Johnson, AT&T, DuPont, Kimberly-Clark, Intel, Texas Instruments, and KLA Corporation, faced stock declines after reporting disappointing earnings or guidance. This negatively impacted the semiconductor space, causing the PHLX Semiconductor Index to drop 0.8%. Conversely, companies like Netflix, United Airlines, Verizon, and Procter & Gamble received positive reactions to their earnings results or guidance.

The economic data this week brought positive news regarding the continued strength of the economy and a moderation in inflation. The Advance Q4 GDP report exceeded expectations, indicating a 3.3% rise in real GDP. Personal income in December increased as anticipated, while personal spending surpassed expectations with a 0.7% increase. Inflation indicators aligned with expectations, with the PCE Price Index and core-PCE Price Index both rising by 0.2% month-over-month. Year-over-year, the PCE Price Index was up 2.6%, unchanged from November, and the core PCE Price Index increased by 2.9%, the lowest since March 2021.

Despite these positive economic releases, Treasuries saw little change from the previous Friday. The 10-year note yield settled one basis point higher at 4.16%, while the 2-year note yield dropped by five basis points to 4.36%. This price action followed a $61 billion 5-year note auction on Wednesday, which witnessed poor demand, and a robust $60 billion 2-year note sale on Tuesday. In other notable news, the People's Bank of China implemented a 50 basis points cut in the required reserve ratio for commercial banks.

Monday saw gains in the stock market, pushing the S&P 500 to a new record high. The positive momentum from last week continued to provide support, complemented by a decline in Treasury yields. Investors were anticipating key events later in the week, including an uptick in earnings reports and potentially impactful economic data. Notably, Monday's gains were more widespread compared to the previous week, which witnessed the outperformance of technology stocks. However, Archer-Daniels (ADM) experienced a significant drop in its shares following news of a review of its Nutrition segment's accounting practices, leading to its CFO being placed on leave.

On Tuesday, the stock market exhibited a mixed performance. While the S&P 500 achieved another fresh record high, thanks to a late recovery by some mega-cap stocks, the major indices largely traded near Monday's closing levels for most of the session. NVIDIA (NVDA) stood out as a significant winner, rebounding after initially experiencing profit-taking activity. The overall market displayed a lack of conviction among buyers and sellers, partly influenced by the S&P 500 and Dow Jones Industrial Average hovering around or near all-time highs, coupled with the imminent release of Q4 earnings. Blue-chip companies reporting earnings since Monday's close elicited mixed reactions from investors, contributing to subdued index-level actions. Notable movements included 3M (MMM) weighing on the DJIA and a post-earnings decline in Johnson & Johnson (JNJ). On the positive side, United Airlines (UAL), Verizon (VZ), and Procter & Gamble (PG) recorded significant gains following their quarterly results. Tuesday lacked noteworthy U.S. economic data releases.

On Wednesday, the market initiated the day with a rally, driven by a substantial gain in Netflix (NFLX) after surpassing Q4 subscriber growth estimates and notable strength in mega-cap and semiconductor stocks. However, a downturn in the afternoon led to major indices ending the day near their lows. Despite this, the Nasdaq Composite (+0.4%) and S&P 500 (+0.1%) closed with modest gains, securing another record close for the S&P 500. Conversely, the Dow Jones Industrial Average recorded a 0.3% decline, and the Russell 2000 fell by 0.8%. Microsoft (MSFT) stood out as a winner among mega-cap stocks, briefly reaching a $3 trillion market cap for the first time. The afternoon pullback coincided with an increase in Treasury yields following a $61 billion 5-year note auction that met poor demand, following Tuesday's strong $60 billion 2-year note sale. Additionally, the S&P 500 struggled to maintain a posture above 4,900. Stocks disappointing with earnings and guidance, such as AT&T (T), DuPont (DD), and Kimberly-Clark (KMB), experienced outsized losses.

On Thursday, the stock market exhibited a positive trend throughout the session. While major indices dipped lower around mid-morning, the afternoon saw an improvement powered by gains in the broader market. This positive bias followed favorable economic data, including the Advance Q4 GDP report, which showed real GDP rising 3.3% compared to an expected 2.0%, and the GDP Price Deflator increasing 1.5% versus an expected 2.8%. Treasury gains in response to the morning's economic data provided added support for equities. The economic data released on Thursday included a 3.3% increase in real GDP for the fourth quarter, surpassing the consensus of 2.0%. Initial jobless claims for the week ending January 20 rose by 25,000 to 214,000, exceeding the consensus of 200,000. Continuing jobless claims for the week ending January 13 increased by 27,000 to 1.833 million. Durable goods orders for December were unchanged, in line with expectations. The Advance Intl. Trade in Goods deficit narrowed to $88.5 billion in December, and new home sales increased by 8.0% month-over-month in December. Overall, the data suggested ongoing economic strength and subdued inflation pressures. Treasury yields saw gains in response to the positive economic data, further supporting equities.

On Friday, the market experienced mixed performance at the index level with below-average volume at the NYSE. The S&P 500 (-0.1%) and Nasdaq Composite (-0.4%) faced headwinds from weakness in the semiconductor sector and losses in certain mega-cap stocks, while the Dow Jones Industrial Average (+0.2%) and Russell 2000 (+0.1%) closed with modest gains. The soft performance in semiconductor-related stocks was attributed to disappointing guidance from Intel (INTC) and KLA Corporation (KLAC), leading to a 2.9% drop in the PHLX Semiconductor Index (SOX). Despite sector-specific challenges, the overall sentiment remained positive as investors absorbed favorable economic data indicating ongoing strength in the economy and easing inflation. The December Personal Income and Spending report revealed robust consumer spending, while inflation moved closer to the Federal Reserve's 2.0% target. Additionally, pending home sales for December exceeded expectations, surging by 8.3%, following a revised 0.3% decline in November. American Express (AXP) contributed to the positive tone with a significant earnings-related gain. Reviewing the economic data for the day, personal income increased by the expected 0.3% month-over-month in December, while personal spending surpassed expectations with a stronger-than-anticipated 0.7% increase (consensus 0.4%). The inflation gauges aligned with expectations, with the PCE Price Index and core-PCE Price Index both rising by 0.2% month-over-month. Year-over-year, the PCE Price Index remained unchanged at 2.6%, while the core PCE Price Index decreased to 2.9% from 3.2% in November. The overall takeaway from the report suggests a Goldilocks scenario: robust consumer spending coupled with core inflation moving closer to the Fed's 2.0% target.

Closing the week, the TSX recorded a 1.0% increase, contributing to a year-to-date gain of 0.8%. The Dow Jones Industrial Average closed at 38,109, marking a weekly rise of 0.6% and a year-to-date increase of 1.1%. Similarly, the S&P 500 Index saw a 1.1% weekly gain, bringing its year-to-date performance to 2.5%. The NASDAQ experienced a marginal 0.09% weekly increase, with a year-to-date growth of 3.0%. The MSCI EAFE* index closed at 2,211, reflecting a weekly gain of 1.5%, despite a year-to-date decrease of -1.1%. The 10-year Treasury Yield stood at 4.14%, showing no change for the week and a 0.3% increase year-to-date. In comparison, the 10-year GoC Yield remained stable at 3.52%, resulting in a week-to-week change of 0.0% and a year-to-date growth of 0.4%. Oil prices surged to $78.12 per barrel, showcasing a substantial 6.6% weekly increase and a notable 9.0% year-to-date rise. Bonds closed the week at $98.07, recording a marginal 0.1% increase, yet marking a year-to-date decline of -1.1%. Canadian Investment Grade Bonds* also noted a 0.1% weekly increase, contributing to a year-to-date decrease of -2.3%. The Canadian/USD Exchange rate concluded the week at $0.74, showing a minor 0.1% increase, yet reflecting a year-to-date depreciation of -1.9%.

Previous update:

The market concluded the week on a positive note, marking its tenth week of gains in the last eleven. The S&P 500, briefly surpassing its all-time high close on Friday, successfully recovered from the losses incurred in the previous week, resulting in a 0.3% increase for the year. The impressive performance of mega cap stocks significantly influenced the overall index, with the Vanguard Mega Cap Growth ETF (MGK) rising by 3.9%, and the Nasdaq Composite logging a 3.1% increase. Notably, the S&P 500 exhibited a 1.8% gain this week, outperforming the Invesco S&P 500 Equal Weight ETF (RSP), which saw a modest 0.2% gain.

Key sectors contributing to the S&P 500's success were information technology (+4.9%), communication services (+3.4%), and consumer discretionary (+1.5%). Conversely, the energy sector experienced a notable decline of 2.4%. The financial sector also underperformed, closing the week with a 0.5% decrease. The start of the Q4 earnings reporting period featured major players like Bank of America (BAC), Wells Fargo (WFC), JPMorgan Chase (JPM), and Citigroup (C), all reporting results. UnitedHealth (UNH) and Delta Air Lines (DAL) were among the notable names with earnings reports. However, the overall market response to quarterly results was negative, setting a cautious tone for upcoming earnings releases. Additionally, Microchip Technology (MCHP) issued a Q4 revenue warning linked to a weakening economic environment.

Boeing (BA) faced a challenging week, plummeting by 12.6% after the grounding of 737 MAX 9 jets due to a fuselage blowout on an Alaska Airlines (ALK) flight.

Economic data for the week presented a mixed picture. The Consumer Price Index (CPI) for December exceeded market expectations slightly, while weekly initial jobless claims remained below levels indicative of a recession. On the other hand, the Producer Price Index was cooler than anticipated. Despite the mixed economic data, market participants adjusted their rate cut expectations, reflecting skepticism about the likelihood of inflation resurgence. The fed funds futures market now indicates a 79.4% probability of a 25 basis points rate cut at the March FOMC meeting, compared to 73.2% yesterday and 68.1% a week ago.

This adjustment was mirrored in the Treasury market's price action. The 2-year note yield, most responsive to changes in the fed funds rate, declined by 24 basis points to 4.15%, while the 10-year note yield fell by nine basis points to 3.95%.

In geopolitical developments, tension escalated following US and UK strikes against military targets in Houthi-controlled areas of Yemen.

On Monday, the stock market experienced a positive day as major indices rebounded from the losses of the previous week, ending a nine-week winning streak. The S&P 500 gained 1.4%, the Russell 2000 climbed 1.9%, and the Nasdaq Composite saw a notable jump of 2.2%. The Dow Jones Industrial Average had a relatively modest gain of 0.6%, primarily impacted by Boeing's (BA) loss following the grounding of 737 MAX 9 jets due to a fuselage blowout on an Alaska Airlines (ALK) flight. Mega cap stocks played a significant role in influencing overall index performance during this broad-based recovery. The positive momentum was supported by a decline in market rates, although Treasuries settled below their daily highs. Treasuries' price action was influenced by reduced inflation expectations, as indicated in the New York Fed's December Survey of Consumer Expectations, along with a decrease in crude oil prices ($70.82/bbl, -2.91, -3.9%) following a report that Saudi Arabia aims to cut crude prices for February due to weak demand. Economic data for the day was limited to the consumer credit report, revealing a $23.7 billion increase in November, exceeding the consensus of $9.3 billion.

On Tuesday, the market exhibited a negative bias, with the A-D line favoring decliners by a 7-to-3 margin at the NYSE and nearly 2-to-1 at the Nasdaq. Despite this, major indices managed to recover from their daily lows, thanks to the support of mega cap stocks that rebounded after early weakness. The prevailing negative sentiment was partly influenced by a Q4 revenue warning from Microchip Technology (MCHP), linked to an economic environment showing signs of weakening. Samsung Electronics also contributed to the pessimistic tone by forecasting a 35% year-over-year decline in Q4 operating profit, falling below analysts' expectations. Economic data for the day included a November Trade Balance of -$63.2 billion, beating the consensus of -$64.7 billion. The key takeaway from the report highlighted decreases in both exports and imports, aligning with a globally weakening economic environment. Additionally, the NFIB Small Business Optimism index for December was reported at 91.9, surpassing the previous month's reading of 90.6.

On Wednesday, the major indices closed near their daily highs, with the S&P 500 gaining 0.6% and turning positive for the year. The Dow Jones Industrial Average saw a 0.5% gain, while the Nasdaq Composite registered a 0.8% increase. Mega cap stocks played a crucial role in boosting the overall gains, with the Vanguard Mega Cap Growth ETF (MGK) rising by 1.2%. Apple (AAPL), despite facing a 0.7% decline earlier in the day following another analyst downgrade from Redburn Atlantic, managed to close with a gain. The market displayed a lack of strong conviction from both buyers and sellers, and the equal-weighted S&P 500 recorded only a modest 0.2% gain. This subdued price action was attributed to a wait-and-see approach ahead of the $37 billion 10-year note auction results, an afternoon speech on the economic outlook from New York Fed President Williams (FOMC voter), the upcoming release of the December Consumer Price Index on Thursday, and earnings reports from the banking industry before Friday's opening.

Thursday's trading session had a negative bias throughout, despite an initial upward move that encountered resistance at the S&P 500's all-time high close of 4,796.56. Decliners led advancers by almost a 2-to-1 margin at the NYSE and a 4-to-3 margin at the Nasdaq. Market participants were digesting the Consumer Price Index (CPI) report for December, which slightly exceeded the market's expectations. The total CPI increased by 3.4% year-over-year in December, up from 3.1% in November, while the core reading slightly decelerated to 3.9% from 4.0%. Additionally, weekly initial jobless claims remained below recession-like levels at 202,000, down from 203,000 in the prior week. Despite data suggesting the Fed may not cut rates as much as hoped, and Cleveland Fed President Mester (FOMC voter) stating on BloombergTV that March is likely too early for a rate cut, the market's rate cut expectations strengthened. Treasuries settled with gains, with increased buying in response to a robust $21 billion 30-year bond reopening, rather than the morning's economic data. In reviewing Thursday's economic data, the December CPI was reported at 0.3% (consensus 0.2%), while the December Core CPI stood at 0.3% (consensus 0.2%). The key takeaway from the report highlighted that although inflation improved, it lost some downward momentum, suggesting the Fed may not rush into interest rate cuts based on this latest CPI reading. Weekly Initial Claims were reported at 202,000 (consensus 209,000), down from a revised 203,000 in the prior week, and Weekly Continuing Claims were 1.834 million. The key takeaway emphasized that employers remain reluctant to cut employees from payrolls, a positive consideration for the labor and economic outlook, though it may not align with the market's expectation for rate cuts.

On Friday, the S&P 500 and Nasdaq Composite closed with minimal changes compared to Thursday, while the Dow Jones Industrial Average and Russell 2000 experienced declines of 0.3% and 0.2%, respectively. This subdued conclusion followed a lackluster start to the Q4 earnings reporting period, setting a cautious tone as investors looked ahead to upcoming earnings releases. Companies like UnitedHealth (UNH), Delta Air Lines (DAL), Bank of America (BAC), and Wells Fargo (WFC) were notable underperformers in this regard. Buyers displayed hesitancy due to the relatively soft commencement of earnings season, compounded by the fact that the S&P 500 and Dow Jones Industrial Average are trading near their all-time highs. Although the S&P 500 briefly surpassed its all-time high close, reaching 4,802 shortly after the open, the initial upward movement was partly a reaction to a Producer Price Index (PPI) report for December that was cooler than expected. Interestingly, this report had a more pronounced impact on the Treasury market than on the stock market. The favorable PPI report led to a recalibration of rate cut expectations among market participants. Notably, rate cut expectations rose despite a December Consumer Price Index report that did not align with the market's hopes, indicating a prevailing belief that inflation is not likely to accelerate. In reviewing Friday's economic data, the December PPI was reported at -0.1% (consensus 0.1%), with the prior figure revised to -0.1% from 0.0%. The December Core PPI stood at 0.0% (consensus 0.2%), maintaining the same level as the prior reading. The report's key takeaway emphasized that wholesale-level inflation has been effectively controlled, with deflation observed in several components. This trend is expected to translate into more favorable inflation readings for the PCE Price Index, the Federal Reserve's preferred inflation gauge.

The TSX closed at 20,987, reflecting a 0.2% increase for the week and a marginal 0.1% gain year-to-date. The Dow Jones Industrial Average concluded the week at 37,593, posting a 0.3% weekly gain but showing a slight decline of -0.3% for the year. The S&P 500 Index recorded a more significant weekly increase of 1.8%, bringing its year-to-date performance to a 0.3% gain. The NASDAQ exhibited a robust 3.1% weekly growth but experienced a -0.3% decline year-to-date, closing at 14,973. The MSCI EAFE closed at 2,204, marking a -0.2% decrease for the week and a more notable -1.4% decline year-to-date. The 10-year Treasury Yield settled at 3.96%, representing a slight -0.1% decrease for the week and a 0.1% increase year-to-date. Meanwhile, the 10-year GoC Yield remained unchanged at 3.23% for the week, with a modest 0.1% gain year-to-date. Oil prices, measured at $72.78 per barrel, declined by -1.4% for the week but demonstrated a 1.6% increase year-to-date. Bonds closed at $99.07, showing a 0.9% weekly gain but reflecting a -0.3% decline year-to-date. In the Canadian market, Investment Grade Bonds experienced a 0.2% weekly increase but sustained a larger -0.9% loss year-to-date. The Canadian/USD Exchange rate settled at $0.75, indicating a -0.5% decline for the week and a more substantial -1.5% decrease year-to-date.