S&P 500 makes it official

US stocks are coming off another week of wrestling with volatility, as the S&P 500 (SPX) closed in a correction—more than 10% below a prior high—for the first time since October 2023.

And while the week featured key inflation data, tariffs again stole the market spotlight.

The S&P 500 (SPX) declined for a fourth-straight week, despite erasing more than half its loss with a strong rebound on Friday:

The headline: S&P 500 hits correction territory despite cool inflation data.

The fine print: Both the consumer price index (CPI) and producer price index (PPI) showed lower-than-expected inflation, but the SPX nonetheless fell into a correction on Thursday as the White House announced new potential tariffs on European trading partners. But Friday’s rally unfolded despite another downside surprise from the preliminary Michigan consumer sentiment survey—data that notably tripped up the market last month.

The numbers: 57.9, the consumer sentiment index reading, down from 64.7 the previous month. Year-ahead inflation expectations came in at 4.9%, up from 4.3% a month earlier.

The scorecard: The Russell 2000 (RUT) small-cap index posted the smallest loss last week, but it still trails the other indexes for the year:

Sector returns: The strongest S&P 500 sectors last week were energy (+2.6%), utilities (+1.9%), and financials (-1.3%). The weakest sectors were consumer staples (-4.3%), consumer discretionary (-3.7%), and communication services (-3.5%).

Stock movers: Protagonist Therapeutics (PTGX) +46% to $55.95 on Monday, Radius Recycling (RDUS) +104% to $27.81 on Friday. On the downside, Arvinas (ARVN) -53% to $8.30 and Asana (ASAN) -24% to $12.64, both on Tuesday.

Yields: The benchmark 10-year Treasury yield ended a choppy week little nearly unchanged at 4.31%.

Futures: Other metals outgained it last week, but cash gold traded above $3,000 for the first time in history on Friday, although it closed below the threshold. April gold futures (GCJ5) traded as high as $3,017.10 on Friday before closing at $3,001.10, up $87 for the week. with April WTI crude oil (CLJ5) ended an up-and-down week just $0.14 higher at $67.18. Biggest gainers: May sugar (SBK5) +4.8%, April platinum (PLJ5) +4.6%. Biggest decliners: May canola (RSK5) -13.1%, May orange juice (OJK5) -13.1%.

The Fed is expected to leave interest rates unchanged this week, but markets will be eager to hear what Chairman Powell has to say about policy and the economy on Wednesday:

●Monday: retail sales, Empire State Manufacturing Index, business inventories, NAHB Housing Market Index
●Tuesday: housing starts and building permits, Import Price Index, industrial production, capacity utilization
●Wednesday: Fed interest rate decision
●Thursday: Q4 current account, Philly Fed Survey, existing home sales, Leading Economic Indicators Index

This week’s earnings include:

●Monday: BioNTech (BNTX), Oracle (ORCL)
●Tuesday: Ciena (CIEN), Dick's Sporting Goods (DKS), Kohl's (KSS), United Nat Foods (UNFI), Casey's General Stores (CASY)
●Wednesday: Williams Sonoma (WSM), Zim Integrated Shipping (ZIM), Adobe (ADBE), American Eagle Outfitters (AEO), Crown Castle (CCI)
●Thursday: Dollar General (DG), Duluth (DLTH), DocuSign (DOCU), Ulta Beauty (ULTA)
●Friday: Buckle (BKE)

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

A rule of thumb for many traders is to pay attention to the Cboe Volatility Index (VIX) when it doesn’t do what it’s “supposed” to do, such as declining instead of rallying when the stock market falls. Last week the VIX closed lower even though the SPX fell 2.3%.

Since 1993, of the 110 other times the SPX posted a 2-3% weekly loss, the VIX closed higher 96 times. In these instances, the SPX’s median return the following week was 0.3%. After the 14 times the VIX closed lower, the SPX’s median gain the next week was 1.3%.

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