Hey everyone, markets we started off this holiday shortened week in good fashion but hit resistance mid week and it was mostly downhill from there. Get my take on the markets in this week’s market round-up.
MARKET SOUND BITES:
U.S. stocks finished lower during the holiday shortened week with sharp losses in the latter half of the week erased the early gains and led to the major indexes finishing lower. The negative shift in sentiment on Thursday appeared to be partially due to Walmart’s Q4 Earnings where its guidance for the year ahead fell short on concerns regarding consumer spending and the health of the overall economy. This followed the Retail Sales report from the prior week, which indicated retail sales dropped by the most in nearly two years in January. Note that U.S., military expenditures of $1.107 T in 2024 were eclipsed by interest expense of $1.124 T. The U.S. now represents nearly 70% of the world’s equity-market valuation. Shadow banks, or nonbank lenders, held $63 trillion in financial assets globally at the end of 2022, representing 78% of global GDP. Markets probably would react vigorously, and negatively, to any hint of a credit crunch.
The week’s economic data releases did little to improve confidence. On Tuesday, Home Builders reported that its housing market index was 42 in February, down from 47 in January and the lowest level in five months. In addition, January housing starts declined nearly 10% from December. S&P Global reported that U.S. business activity growth came close to stalling in February, as its flash PMI reading came in at a 17-month low of 50.4. Services activity entered contraction territory with its lowest PMI reading in over two years (49.7), which partially offset growth in the manufacturing sector. Meanwhile, the University of Michigan reported its Index of Consumer Sentiment for February on Friday morning, which dropped nearly 10% month over month to 64.7.
U.S. Treasuries gained after a modest midweek rally following the release of the most recent Fed meeting minutes, which showed that policymakers were prepared to hold rates steady until inflation improves. The weak PMI data on Friday triggered another rally in Treasuries.
Business activity in the eurozone remained in expansionary territory for a second consecutive month in February where the Composite PMI Output Index registered 50.2, a level that was unchanged from January. In the UK, the Composite PMI, which covers services and manufacturing, was still above 50 but declined modestly from January. The latest UK inflation and wage data prompted financial markets to significantly reduce bets on three interest rate cuts by the Bank of England this year. Annual consumer price growth accelerated to 3% in January—the fastest rate since March 2024—from 2.5% in the previous month.
Japan’s stock markets fell over the week, with them struggling in an environment of yen strength and rising Japanese government bond yields. Japan’s nationwide core consumer price index (CPI) rose 3.2% year on year in January, slightly ahead of expectations for a 3.1% increase and up from 3.0% in the prior month, amid surging rice and energy costs. Japan’s gross domestic product (GDP) expanded by more than anticipated over the final quarter of last year. GDP grew 0.7% quarter on quarter in the fourth quarter of 2024, better than the 0.3% consensus and compared with 0.4% in the third quarter. The economy grew 2.8% on an annualized basis in the last three months of 2024.
Mainland Chinese stock markets rose for the week, lifted by strength in technology shares following better-than-expected earnings from some of the country’s leading tech companies. The surprisingly strong results from Alibaba and other Chinese tech companies came after local artificial intelligence startup DeepSeek showed off its technological capabilities in January. Sentiment was also buoyed after a high-profile meeting between President Xi Jinping and several Chinese tech entrepreneurs signaled that the government was adopting a more supportive stance toward private sector companies. a looming trade war with the U.S. has underscored the importance of the private sector as a growth engine for China.
Enjoy this week’s round-up
Don’t Be A Rat Brain Trader – Be the Red Stripe Zebra !!
Trade Smart !
hpb
