U.S. Stocks Snap 5-week Winning Streak

The S&P 500 lost some steam after jumping almost 5% so far this year. The benchmark index closed the week down 0.42%, hit by inflation data. The tech-heavy Nasdaq Composite slipped 1.34%, bringing its year-to-date performance to 5.09%.

The Producer Price Index for final demand increased 0.3% in January, seasonally adjusted, surpassing economists' projections. This data, arriving after an unexpected rise in consumer inflation, could challenge investors’ predictions regarding rate cuts despite a slump in January retail sales. Furthermore, the jobs market continues to show strength. Treasury yields jumped accordingly, with the yield on the U.S. 10-year Treasury rising 11 basis points to 4.28%, marking an increase of 40 basis points since the beginning of the year.

By contrast, European stock indices gained momentum with the MSCI EMU up 1.09% over the week (+3.71% YTD) and the FTSE up 1.84% (-0.28% YTD). The CAC 40 gained 1.6% in France, reaching a new historical high of 7,800.91 points. The Governor of the Bank of France, François Villeroy de Galhau, confirmed in the Belgian daily L'Echo on Friday that it "seems certain" that the ECB's rates will decrease this year. He now evaluates the risk of lowering them too late as "at least" equivalent to doing it too soon.

In Asia, Japan’s Nikkei also climbed to its highest on Friday. The blue-chip gauge added 4.31% over the week (+15.01% YTD). With the corporate reform still going through and the weak yen, Japanese exporters continue to thrive. Besides, Bank of Japan Governor Kazuo Ueda said on Friday that monetary policy would most likely remain accommodative, even after ending negative interest rates, echoing recent reassurances from BOJ officials that had weighed on the yen.

Markets in China were closed for the Lunar New Year holiday.

Tech Rally Hits Speed Bumps after Hotter-than-Expected Inflation Readings

Information technology and communication services led losses among the 11 major S&P 500 sector indexes, down 2.46% and 1.61% respectively. Yet both sectors remain the best year-to-date performers with gains of 7.45% and 10.05% respectively.

On the flip side, the energy sector led the pack, up 2.17% for the week (+1.49% YTD), pushed higher by Occidental Petroleum Corporation (NYSE: OXY). The OXY stock rose 5.31% after Warren Buffet's Berkshire Hathaway (NYSE: BRKa) revealed late Wednesday it had raised its stake in the oil major by about 9% in Q4. The WTI crude oil price gained 3.06% over the week.

However, the International Energy Agency (IEA) said on Thursday that global oil demand growth is losing momentum, contrasting sharply with the views of OPEC. The agency has reduced its growth forecast for 2024 and anticipates oil demand to hit its peak by 2030 due to the worldwide shift towards cleaner energy sources. On the other hand, OPEC predicts a continuous rise in oil usage over the next twenty years.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.