The previous trading week was full of important news that will impact monetary policy as well as market policy for the next several months. On Wednesday, inflation data for the month was released and found that it rose by .4 percent over the past month. On an annualized basis, inflation came in at 3 percent, which was slightly higher than the expected 2.9 percent.
However, some were quick to point out that the uptick in inflation could be seasonal and nothing to panic about. Regardless, the initial reaction from the market was that interest rates would likely stay where they were until at least June. Of course, nothing is guaranteed as the new administration is pushing Fed Chair Jerome Powell to reduce rates regardless of market conditions.
On Thursday, the Price Producers Index (PPI) was released and it revealed that prices rose by .4 percent in the past month. When food and energy prices were removed from the calculation, prices only rose by .3 percent over the past month. Also on Thursday, unemployment claims data was made public, and over the past seven days, 213,000 people requested benefits compared to an expected 217,000.
Friday, retail sales data was released, coming in below market expectations. Overall, sales dropped by .9 percent in January compared to an expected drop of .2 percent. For some, this put the prospect of rate cuts back on the table as falling sales numbers could be signs of weakness elsewhere in the economy. Others said that the drop was caused by the wildfires and unusually cold weather throughout the country.
In other important news, Fed Chair Powell testified in front of members of the House on Tuesday and Wednesday. Although his testimony created some momentary market volatility, most observers believe he didn’t say anything too out of the ordinary. His key message was that the Fed would cut rates if necessary but that there was no rush to act right now.
The S&P 500 had another positive week finishing up 1.14 percent to close at 6,114 on Friday. The market made its low of the week Wednesday morning when it dipped to 6,017 before reversing. It made its high of the week of 6,124 on Friday morning before giving up some ground going into the day’s close.
Like the S&P, the Dow was also positive for the week finishing up .47 percent. This represented a gain of 187 points for the index that closed at 44,546 at the end of trading on Friday. Also like the S&P, the Dow made its low of the week before reversing and closing the week near the high of the last five trading days. The weekly range was 44,133 at the low end while 44,753 was the high.
Finally, the Nasdaq was up 1.75 percent this week to close at 20,026. This was a gain of 344 points for a market that is up over 1,100 points for the month of February. Over the past five trading days, the index made a low of 19,423 on Wednesday and closed at its high of the week.
In international news, New Zealand announced that it expects inflation to drop slightly to 2.06 percent in the next quarter. Great Britain revealed that monthly and quarterly projected gross domestic product (GDP) figures beat expectations. For the month, the GDP grew by .4 percent compared to .1 percent while the quarterly figure is believed to be .1 percent compared to a drop of .1 percent. Finally, Switzerland announced Thursday morning that inflation was down by .1 percent on a monthly basis.
The upcoming week will likely be another significant one although it will likely start on a muted note as the President’s Day holiday is Monday. However, the FOMC meeting minutes will be released Wednesday while the Flash Manufacturing and Flash Services PMI reports are released on Friday. Unemployment claims data will be made public on Thursday.