Wall Street Takes a Break After Records

U.S. stock markets slid this week, taking a breather from record levels. Federal Reserve Chair Jerome Powell said on Thursday that before the U.S. central bank considers cutting rates, it wants to see further evidence that inflation is steadily reducing to the 2% target. This perspective was supported by Fed Governor Michelle Bowman, who confirmed that the U.S. economy isn't yet in a position for the Federal Reserve to lower interest rates. Data released earlier Thursday revealed that last week, the number of new unemployment benefit claims filed by Americans was steady at 217,000, as the labour market continues to ease gradually. In January, U.S. job openings decreased by 26,000.

The benchmark S&P 500 edged down 0.26% for the week and the tech-heavy Nasdaq Composite fell 1.17%. By contrast, small cap stocks remained in the green with the Russell 2000 up 0.30% week-over-week.

For once, most European equity indices outperformed their US peers. The MSCI EMU was up 1.12%. Despite President Christine Lagarde's objections, the economic reality suggested by the European Central Bank's lowered growth and inflation predictions on Thursday means that the ECB's cycle of reducing rates is likely to start soon. Besides, Bank of France Governor Francois Villeroy de Galhau stated that it seemed very likely to him that there would be a first rate cut in the spring.

In Asia, Japan’s Nikkei ended a streak of five euphoric weeks, losing 0.56% while the Shanghai Composite gained 0.63% amid stronger-than-expected trade data with robust exports to some of China's emerging market trade partners.

It’s also worth noting that the MSCI World extended its winning streak to a ninth week (+0.48%), bringing its year-to-date performance closer to that of US indices while exhibiting lower volatility:

Underperforming Sectors Regain Momentum  

The last two S&P sectors whose year-to-date performance was largely negative last week bounced back. Utilities led the pack with a gain of 3.19% for the week. Real estate added 1.46% as Treasury yields declined. Benchmark 10-year U.S. Treasury yield was down 10 basis points to 4.08%.

On the flip side, the best sectors at the start of this year were subject to profit-taking. Tech stocks were down 1.09% over the week. The IT sector was dragged down by Apple (AAPL) after the tech behemoth received a €1.84 billion antitrust penalty imposed by the European Commission for suppressing competition from other music streaming platforms like Spotify (SPOT) through constraints placed on its App Store. While Apple has declared its intention to challenge the decision, its shares saw a week-over-week slump of 4.97%.

Communication services also finished the week in negative territory (-0.65%) in the wake of Alphabet stocks (GOOG), down 1.30%. The search giant continues to be under pressure following its Gemini AI blunders.

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.