Hope you are all doing well. It was a mixed week for stocks. The major U.S. stock indexes rose more than 1% on Monday but struggled to maintain positive momentum as new data on inflation came out mid-week. For the week, the S&P 500 slipped 0.2%, the Dow was essentially flat, and the NASDAQ added 0.6%. Last night the NBA held their annual dunk contest. I have broken down this week’s update using iconic dunks from the competition.
Spud Webb’s 360 Dunk – 1986
The decline in inflation like Spud Webb (5 foot 6) was smaller than expected. The market did not love the inflation numbers. The data was positive but not positive enough that it would lead the Fed to pause. Tuesday’s Consumer Price Index release showed a smaller-than-expected decline to an annual inflation rate of 6.4%; but a decline nonetheless. It was the lowest read on inflation since October 2021. A separate report on Thursday indicated that prices charged by industrial suppliers rose more than had been forecast. Slower declines in inflation means the Federal Reserve probably sticks with their aggressive stance.
Mac McClung Jumps Over Two – 2023
Retail sales jumped over the previous two months of declines. U.S. retail sales in January rose 3% on a seasonally adjusted basis. It was the largest monthly increase in nearly two years. In November and December, sales dropped around 1%. The January number more than made up for the lackluster November and December and tells you consumers are still spending. A resilient consumer leads to a resilient economy. Economic resilience gives the Federal Reserve more wiggle room to keep raising rates. The retail sales number also gives hope that any slowdown or recession later in the year won’t be as bad as anticipated. What was most encouraging about the report was it indicated strong spending at restaurants and furniture outlets. These are areas where people spend money when they feel good about the state of their personal finances. January was unusually mild from a weather standpoint so that probably helped the numbers a bit but it was still a really good report.
Dee Brown’s No Look Dunk – 1991
After months of not looking at risk assets, investors are willing to dip their toe back into risk assets. The recent strength in the Nasdaq is evidence of that. Even riskier assets like crypto currency are starting to experience a bounce. The price of Bitcoin climbed around 14% for the week and rose above $24,000 for the first time since last August. As recently as 3 months ago, Bitcoin was trading below $16,000. We are still going to experience volatility in the coming months but the move into riskier assets shows you that investors are starting to think the worst is behind us.