Market 02/12: S&P 500 hits new high, December CPI revised slightly lower

Statements from Fed officials and interest rate path predictions

Bowman (Fed)

• Interest rate policy on the right track - but rate cuts not an appropriate option in the near future.

• Too early to decide when and how much to cut interest rates due to many risks remaining in the inflation fight.

• Need to pay attention to the banking system and possibility of financial crisis due to commercial real estate risks + bond yields.

Survey from NABE:

• 21% of economists begin to think Fed is keeping monetary policy too tight.

Market expectations:

• Market has shifted expectations for Fed's first rate cut from March to May:

  

Seasonally adjusted (SA) CPI not much different - January CPI forecast

Bureau of Labor Statistics (BLS) released seasonally adjusted CPI growth figure on Friday: not much difference compared to pre-adjustment.

• 3-month average CPI growth unchanged:

  

Headline CPI retains the same increase +3.3% YoY December = previous data.

• But monthly increase revised down +0.2% MoM (from +0.3% MoM):

  

BLS forecasts January 2024 CPI to decline:

• Core CPI: expected to fall to +3.7% YoY in January.

• Headline CPI expected to fall below 3% threshold for the first time.

→ Price pressures are sustainably easing.

Cleveland Fed: CPI Nowcasting: Headline CPI expected to fall to 2.94% y/y, core CPI to 3.81% y/y for January.

The entire market is awaiting January CPI figure tomorrow.

3-year inflation expectations lowest in 11 years

According to the New York Fed survey:

• 1-year inflation expectations: 3.0% (previous: 3.0%).

• 3-year inflation expectations: 2.35% (previous: 2.62%) => lowest in 11 years

• 5-year inflation expectations: 2.54% (previous: 2.54%)

• Expected average prices next year to decrease for: gas, food, and rent prices.

S&P 500 hits 5,000 milestone for the first time in history

S&P 500 up 5 consecutive weeks, first time hitting 5,000 points.

• Solid earnings reports + cooling inflation data + strong economy have driven the market's upward momentum from the start of 2024 until now.

• In just 3 months, market cap has increased by nearly +8.5 trillion USD.

• Large-cap tech stocks are the main drivers for the market (except Tesla): up more than +20% early 2024, double that of the remaining S&P 500 companies.

• It took only ~719 trading sessions for S&P 500 to rise from 4,000 to 5,000 points.

  • While to rise from 1,000 points (1998) to 2000 points (2014): the market needed 4,168 trading sessions.

Bitcoin surges past 49,000 USD, highest in 2 years

Bitcoin marks recovery as it rises to >49,000 USD - highest since December 2021.

The upward momentum comes from inflows into spot Bitcoin ETFs + the upcoming halving in April.

• Fidelity ETF records inflows of +130 million USD on 02/08, highest monthly.

• Ethereum also up +11% since 01/25.

  

Crypto market investors are becoming extremely excited.

Events this week:

• January CPI inflation - Tuesday

• Retail sales data - Thursday

• Philly Fed manufacturing index - Thursday

• January PPI inflation - Friday

• 8 speeches from Fed officials this week

Corporate earnings report schedule this week

• 20% of S&P 500 companies reporting earnings.

Some other news:

1. Cisco expects to cut thousands of employees in new restructuring to cut costs.

   

   • Since the beginning of this year, ~34,000 tech sector workers have been laid off.

     

2. Diamondback acquires oil and gas producer Endeavour in a deal worth 26 billion USD.

   • Diamondback stock surges more than 10% in the session following this news.

3. Nvidia (market cap: 1.83 trillion USD) has just surpassed Amazon to become the 4th largest US company.