Hello, I’m Greg Curvall, Senior Portfolio Manager with Fifth Third Bank.
On Friday, the S&P 500 closed above the 5,000 level for the first time, as easing inflation data, a good-enough earnings season, and a resilient U.S. labor market keep investors hungry for more.
Treasury yields increased at the start of last week, spurred higher by the previous week’s strong jobs report and hawkish comments by Fed Chair Jerome Powell in a “60 Minutes” interview. Powel reiterated that he saw no need to cut rates immediately, which sent stocks lower and interest rates in the opposite direction. The yield on the 10-year Treasury finished last week at 4.18 percent. That is about 30 basis points higher since the beginning of the year, but still well below the 5 percent mark reached back in October of last year.
With earnings season more than half-way complete, companies are beating expectations. About 75 percent of the S&P 500 companies reporting fourth quarter results have surprised to the upside, slightly better than historical averages.
Next month will mark the 15-year anniversary of the bottom of the S&P 500 during the Financial Crisis of 2007-2009. The S&P 500 index bottomed at 666.79 on March 6, 2009. On Friday it reached 5,000, an all-time high. That is a return of over 16 percent per year, over the 15-year period, basically twice the historical average for the S&P 500.
We have a relatively light economic calendar this week. On Tuesday, we get the Consumer Price Index, or CPI, a popular gauge of inflation. Economists are expecting the report to show that prices rose 2.9 percent over the last 12 months, which would be the lowest print in nearly three years, and a big drop from the 3.4 percent headline number in December. On Thursday, we get a close look at the health of the U.S. consumer, with the release of the Retail Sales report. Economists are expecting domestic sales to decline in January, mostly due to seasonal factors and widespread winter storms that likely disrupted retail spending last month. Then we finish up the week with another read on inflation with the release of the Producer Price Index, or PPI, on Friday. We will also get a snapshot of the health of the U.S. housing market, with the release of Housing Starts and Building Permits.
As always, we will be watching and reporting back to you next week. Thank you.
