Investors Weigh Inflation Fears vs. Economic Resilience (Weekly Cheat Sheet)

Last week the stock market went on quite a ride this past week. After starting strong on Monday, stocks took a tumble on Tuesday following a hotter-than-expected inflation report. But the major indices managed to regain their footing later in the week to end on a mixed note.

The S&P 500 declined 0.4% for the week, closing at 5,005.57. But the damage could have been worse – at one point the index had sunk 1.4% in a single day.

Meanwhile, the tech-heavy Nasdaq Composite dropped 1.3% to 15,775.65 amid losses in mega-cap stocks like Amazon (-2.8%) and Microsoft (-3.9%). Let’s get into it.

Last Week Markets

What Spooked Stocks

The selling was sparked by January’s consumer price index (CPI) report on Tuesday, which came in higher than economists’ forecasts. The CPI rose 0.3% month-over-month, while the core CPI (which excludes volatile food and energy prices) climbed 0.4%.

  • This suggests inflationary pressures may be more persistent than hoped.
  • It also means the Federal Reserve likely won’t cut interest rates anytime soon.

As a result, Treasury yields spiked higher, making bonds more attractive versus stocks. The 2-year yield ended the week at 4.65%, up 0.15 percentage points.

Meanwhile, the 10-year yield settled at 4.30%, up 0.11 percentage points.Rising yields hit rate-sensitive sectors like technology and communications services especially hard. But more economically sensitive pockets of the market like energy and materials stocks still managed to eke out gains.

Signs of Economic Resilience

While the hot inflation data rattled markets, stocks ultimately held up well. Other economic reports painted a picture of ongoing strength.

  • Jobless claims dropped to just 212,000 – remarkably low for this stage of the economic cycle.
  • Retail sales fell in January, but likely due to poor weather rather than weakening consumer demand.
  • Regional manufacturing surveys indicated the factory sector continues expanding.

This resilience gave investors confidence that the economy could withstand further Fed tightening if needed. It also suggests earnings could remain solid in the quarters ahead.

What Lies Ahead

Markets face a shortened week ahead with Monday’s Presidents Day holiday. While stocks endure some choppiness near-term, the longer-term setup looks constructive.

Inflation keeps trending in the right direction – down. Consumers and businesses seem poised to keep spending. Expectations for Fed rate cuts later this year could provide an additional catalyst.

  • If earnings hold up well, stocks may have room to run higher in 2024 after their strong showing already so far this year.
  • But investors should brace for some bumps along the way, especially if yields spike anew.

In these tricky times, it pays to take a balanced approach. Consider tilting portfolios toward inflation-fighting sectors like energy and healthcare. High-quality bonds can also buffer volatility when stocks sell-off. Stay diversified and keep a long-term perspective.


Commodities managed small gains this week even as the US dollar strengthened and demand concerns lingered.

Oil prices inched higher despite a huge 12 million barrel build in US crude stockpiles. Brent rose to $83/barrel while WTI climbed to $78. OPEC and the IEA left their demand forecasts unchanged in the latest reports.

Meanwhile, natural gas prices in Europe plunged to a 2024 low around $26/MWh as winter winds down.

Gold suffered with yields spiking, dropping near $2,000/ounce. Copper stalled around $8,150/metric ton on the LME. Other base metals like aluminum and zinc treaded water too.

With global growth expected to pick up and supplies still tight, commodities have room to recover once macro dynamics stabilize.


Cryptocurrencies powered higher this week thanks to massive inflows into Bitcoin and Ethereum ETFs.

  • Bitcoin gained 8% to $52,200, lifted by $631 million of fresh capital into Bitcoin Spot ETFs on Tuesday alone.
  • Almost 90% of Bitcoin holders are now in the green as prices hit 2024 highs.
  • Ether outperformed with a 12% rally to above $2,800.

Other factors driving crypto prices include ebbing inflation pressures and optimism the Fed may cut rates by year-end. Institutional interest also continues growing.

Of course, cryptocurrencies stay notoriously volatile. But more widespread adoption helps validate their long-term staying power.

The week’s uneven performance across assets reflects conflicting signals on the economy and policy outlook. While risks remain, the overall backdrop still seems conducive to further gains in risk assets over 2024.

Calendar & Movers

Economic Reports

Wednesday, February 21: FOMC Meeting Minutes (January)

Thursday, February 22: Existing Home Sales (January)

Earnings season rolls on next week with several heavyweight reports on tap that could significantly impact market sentiment. However, with a slew of conflicting economic data recently, investors are left scratching their heads as to whether we’re barreling toward recession or overheating.

Earnings Spotlight

The main event will be Nvidia’s (NVDA) earnings on Wednesday, February 21st. The AI and chipmaking superstar has skyrocketed over 45% year-to-date, leaving many to wonder whether its hot streak will cool off. Consensus estimates call for 34% annual earnings growth, but with tech valuations under pressure, Nvidia’s report and guidance will set the tone across the sector.

Meanwhile, Walmart (WMT) offers a defensive counterweight when it unveils fiscal Q4 results Tuesday morning. The retail behemoth, up 6% in 2023, is splitting its stock three-for-one on Friday. Its quarterly figures will thus provide critical insight into consumer spending habits amid high inflation.

Other major names reporting next week include:

  • Home Depot (HD) and Medtronic (MDT) on Tuesday
  • Analog Devices (ADI), Rio Tinto (RIO), and Rivian (RIVN) on Wednesday
  • Moderna (MRNA), Intuit (INTU), and Booking Holdings (BKNG) on Thursday

Looming Bitcoin Halving Injects Crypto Volatility

In crypto land, volatility is heating up ahead of Bitcoin’s next halving event in May. This will slash the reward for mining coins in half, constricting supply. Bitcoin has surged ahead of previous halvings before drifting lower post-event. With crypto correlations still high, Bitcoin’s price swings could impact sentiment across risk assets.

Data Diagnostics

Amid the earnings barrage, investors will have little economic data to parse. This leaves markets prone to spin their wheels based on corporate profit reports.

Options trading activity shows Digital World Acquisition Corp. (DWAC), SunPower (SPWR), Fisker (FSR), and Beyond Meat (BYND) could see outsized moves next week.

Meanwhile, the most overbought stocks based on their 14-day Relative Strength Index (RSI) are:

  • Super Micro Computer (SMCI)
  • Beamr Imaging (BMR)
  • BioLargo (BLGO)

And the most oversold names per the 14-day RSI are:

  • SSR Mining (SSRM)
  • AN2 Therapeutics (ANTX)
  • QuidelOrtho (QDEL)

With crosscurrents buffeting markets, next week’s torrent of earnings and crypto excitement could significantly shift sentiment. Key reports from Nvidia, Walmart, and others may provide the next major catalyst.

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