Stocks Soar: Nvidia Fuels 1% S&P, Dow Surge

Key Points

• Nvidia’s earnings report propelled stocks to record highs, with the S&P 500 and Dow Jones both ending the week up by approximately 1%.
• The Nasdaq Composite saw a modest gain, adding about 0.6%.
• Upcoming inflation data, particularly the Personal Consumption Expenditures (PCE) index, is highly anticipated.
• Economists expect a 2.4% annual rate for January’s “core” PCE, excluding food and energy, indicating persistent inflation concerns.
• The market adjusts its interest rate cut expectations for 2024, aligning more closely with the Federal Reserve’s forecasts.
• Key quarterly reports from major retailers like Macy’s and Best Buy will offer insights into consumer spending trends amidst inflation.

Last week, the stock market experienced significant growth, primarily driven by Nvidia’s robust earnings report. This surge led to record highs, with the S&P 500 and the Dow Jones Industrial Average both closing the week up by approximately 1%. Meanwhile, the Nasdaq Composite increased by about 0.6%, showcasing a positive trend across major indices. These gains highlight investor confidence and the impact of strong corporate earnings on market sentiment.

Eyeing Inflation: January’s Core PCE Hits 2.4%

As investors navigate the market, inflation remains a critical concern. The upcoming Personal Consumption Expenditures (PCE) index, the Federal Reserve’s preferred inflation gauge, is particularly significant. Economists expect Thursday’s update to show a 2.4% annual rate for January’s “core” PCE, which excludes food and energy. This projection, up from a 0.4% monthly increase the previous month, suggests that inflation may be more persistent than previously thought, potentially challenging the Fed’s 2% target.

Stocks Rate Cut Views Align: Fed Predicts Three in 2024

Market expectations for interest rate cuts in 2024 have significantly shifted. Initially, six cuts were anticipated in December; however, the forecast has now aligned with the Federal Reserve’s predictions of three. This adjustment reflects a more cautious outlook on inflation and economic growth, underscoring the importance of upcoming economic indicators in shaping monetary policy.

Retail Earnings Reveal: Macy’s, Best Buy Test Inflation Impact

The forthcoming quarterly reports from Salesforce, Lowe’s, Macy’s, Okta, and Best Buy, among others, will be crucial in assessing consumer spending trends. Specifically, reports from Macy’s, Best Buy, and TJX will provide valuable insights into the retail sector’s performance. According to Simeon Siegel, a senior retail analyst at BMO Capital Markets, discretionary spending remains robust despite inflationary pressures on staples. These reports will offer a clearer picture of consumer behaviour and its impact on the broader economy.

In summary, the stock market’s recent performance, alongside concerns about inflation and interest rates, underscores a complex economic landscape. Understanding market dynamics is essential, as investors and analysts monitor upcoming economic indicators and corporate earnings to forecast future trends.