Eye on inflation

  • Market slips, Powell stresses patience on inflation
  • Energy stocks bounce with oil, interest rates jump
  • This week: Inflation (CPI and PPI), retail sales

The Fed has stated it will base its actions on data, and this week should give the central bank plenty to chew on. US stocks are coming off just their second down week of the past six, with the latest inflation data due out in the next few days.

The S&P 500 (SPX) jumped last Tuesday as Federal Reserve Chairman Jerome Powell spoke about monetary policy at the Economic Club of Washington, D.C.—the only notable interruption to its pullback from February 2’s five-month high:

Chart 1: S&P 500 (SPX), 12/2/22–2/3/23. S&P 500 (SPX) price chart. Tuesday–Thursday surge

Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.) Note: It is not possible to directly invest in an index.

The headline: Market dips as traders mull Fed stance.

The fine print: Last Tuesday, the market appeared to latch onto Jerome Powell’s comments that 2023 should be a year of "significant declines in inflation," but was less inclined to heed his warning that the disinflationary process still has “a long way to go.”1

The number: 5.25%, Morgan Stanley & Co.’s current estimate of how high the Fed will raise interest rates before pausing, which implies 0.25% hikes at both the March and May policy meetings.2

The scorecard: Large-caps gave back the least ground last week:

US stock index performance for week ending 2/10/23. S&P 500 (SPX), Nasdaq 100 (NDX), Russell 2000 (RUT), Dow Jones Industrial Average (DJIA).

Source (data): Power E*TRADE. (For illustrative purposes. Not a recommendation.)

Sector roundup: The strongest S&P 500 sectors last week were energy (+5.1%), health care (-0.2%), and financials (-0.4%). The weakest sectors were communication services (-6.6%), consumer discretionary (-2.2%), and real estate (-2%).

Stock movers: Oak Street Health (OSH) +30% to $33.68 on Tuesday, Cardiovascular Systems (CSII) +48% to $19.75 on Thursday. On the downside, Capri Holdings (CPRI) -24% to $50.71 on Wednesday, Digital Turbine (APPS) -24% to $12.33 on Thursday, Lyft (LYFT) -36% to $10.31 on Friday.

Futures: March WTI crude oil (CLH3) pivoted from its January 27–February 3 downturn to close last week up more than $6 at $79.72/barrel. April gold (GCJ3) crept higher the first three days of last week before turning lower again on Thursday and ending the week slightly lower at $1,874.50/ounce. Week’s biggest up moves: March WTI crude oil (CLH3) +8.8%, April Brent crude oil (BJ3) +8.2%. Week’s biggest down moves: March lumber (LBSH3) -15.6%, February micro ether (ETHG3) -8%.

Coming this week

In addition to the latest inflation readings (CPI and PPI), this week includes retail sales, housing numbers, and leading indicators:

Monday: NY Fed Inflation Expectations
Tuesday: NFIB Business Optimism Index, Consumer Price Index (CPI)
Wednesday: Retail Sales, Empire State Manufacturing Index, Industrial Production, Capacity Utilization, NAHB Housing Market Index, Business Inventories
Thursday: Producer Price Index (PPI), Housing Starts and Building Permits
Friday: Import and Export Price Indexes, Leading Economic Indicators Index

This week’s earnings include:

Monday: Arista Networks (ANET), Teradata (TDC), Check Point Software (CHKP), Lattice Semiconductor (LSCC), Medpace Holdings (MEDP), SolarEdge Technologies (SEDG), Monday.com (MNDY)
Tuesday: Airbnb (ABNB), Exelon (EXC), Cleveland-Cliffs (CLF), Coca-Cola (KO), LCI Industries (LCII), Marriott (MAR), Livent (LTHM)
Wednesday: Albemarle (ALB), Analog Devices (ADI), Barrick Gold (GOLD), Boston Beer Company (SAM), Kraft Heinz (KHC), SunPower (SPWR), Waste Connections (WCN), Roblox (RBLX), Trade Desk (TTD), Zillow (ZG), Shopify (SHOP), Copart (CPRT)
Thursday: Applied Materials (AMAT), Hyatt Hotels (H), Vulcan Materials (VMC), Datadog (DDOG), Dropbox (DBX), Epam Systems (EPAM), Tower Semiconductor (TSEM)
Friday: AutoNation (AN), Deere (DE)

Check the Active Trader Commentary each morning for an updated list of earnings announcements, IPOs, economic reports, and other market events.

Market Mover Update: C3.ai (AI) closed last week 17% below last Monday’s 13-month high (see “Nothing artificial about options intelligence”). Canadian Pacific (CP), which has traded in an increasingly tight consolidation over the past two weeks, rallied 2.7% on Friday (see “Traders ride the rails”).


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1 The Economic Club of Washington, D.C. (www.economicclub.org). Interview with Federal Reserve Chairman Jerome Powell. 2/7/23.
2 MorganStanley.com. A Change in Fed Policy Expectations. 2/9/23.

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