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Good Morning!
Hope you had a good week. Before we get into the news, a quick note. We have new small cap stock alerts coming soon, so keep an eye on your inbox.
It was a volatile week on Wall Street, with trade policy taking center stage and inflation concerns adding to the pressure.
What Moved Markets This Week
Wall Street capped off a volatile week as investors grappled with a potent cocktail of "sticky" inflation data and a shifting narrative around the global economy. After a brief relief rally earlier in the month, the major indices retreated, leaving the S&P 500 to close out a challenging February characterized by high-altitude turbulence.
The primary headwind this week was a hotter-than-expected Producer Price Index (PPI) report. Wholesale inflation rose 0.5% in January, with core figures nearly doubling consensus expectations. These numbers effectively threw cold water on the "immaculate disinflation" narrative, suggesting that price pressures remain stubborn. For the average investor, this means the anticipated pivot toward lower interest rates may be further on the horizon than originally hoped.
Equity markets faced significant downward pressure as the week closed, with the blue-chip averages leading the laggards. While technology growth had been the primary engine of the market's recent ascent, we saw a notable rotation this week. Investors began carving out positions in more defensive sectors, such as Utilities and Consumer Staples, seeking a "storm cellar" amid renewed macroeconomic uncertainty.
The energy sector also remained in the spotlight. Geopolitical anxieties pushed crude oil prices to an eight-month high, sparking fresh concerns about energy-led inflation. This dynamic created a "risk-off" environment where capital moved away from speculative growth and toward tangible assets and government bonds.
Looking Ahead: The March Mandate
As we turn the page to next week, the market’s focus shifts from wholesale prices to the broader health of the American consumer and the labor market.
The upcoming February Jobs Report will be the ultimate litmus test. Analysts are looking for signs of a "goldilocks" cooling – strong enough to support the economy, but soft enough to keep the Federal Reserve from tightening the screws further. Additionally, we will receive fresh data on Retail Sales and Manufacturing PMIs. These reports will provide the clearest window yet into whether the economy is headed for a soft landing or if the higher-for-longer interest rate environment is finally beginning to bite.
In the short term, expect the market to remain sensitive to any headlines regarding global trade talks and energy supply chains. Volatility is likely to persist as the market searches for a new floor in this high-interest-rate regime.
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See you soon!
SmallCapStocks Team
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