The S&P 500 is not often down for five consecutive weeks, so one has to think this might be the week the market attempts a rebound. There’s a good chance of a bounce, but whether it happens is another question.
Outlook
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Cracks began to emerge in the bullish USD story during February as poor retail sales and plunging services PMI reinforced negative fiscal headlines.
The cooler-than-expected CPI report initially pushed equities higher after the news, but once implied volatility reset, the rally fizzled, and choppy price action took over.
By Tuesday's close, all three averages were down 3 percent on the week, and the S&P had given up its post-election gains. Stocks fell as tariffs affected Canada, Mexico, and China. Each country announced retaliatory tariffs of their own, further fanning inflationary fears among investors.
The week began under pressure after the White House said 25 percent tariffs on Mexico and Canada would begin after the 30-day pause ends in early March.
Traders are picking up the risk-off playbook in response to Washington implementing levies on products from Canada, China and Mexico.
Investors were forced to navigate a week of disappointing news about the economy and inflation as the S&P 500 Index declined 1.66 percent, while the Nasdaq Composite Index dropped 2.51 percent.
We could forget about inflation for now because more pressing matters are at hand—namely, the most important stock in the world, Nvidia, and its earnings report.
The potentially unprecedented scale of the destruction from the California wildfires has investors worried about the possible medium- and longer-term impact on municipal and corporate debt issuers.
Stocks advanced last week despite some intra-week volatility, punctuated by comments from Fed Chair Powell, who said the central bank doesn’t “need to be in a hurry” to lower interior rates further.
The sector has continued to underperform expectations, leaving investors disappointed. But this disappointment should not obscure the shifting dynamics that may favor a brighter outlook in the year ahead.
While outcomes are always highly uncertain, a consistent, disciplined, and repeatable investment process is firmly in their control.