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Wall Street snaps weekly winning streak on hotter-than-expected inflation

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Wall Street snaps weekly winning streak on hotter-than-expected inflation

US stocks posted losses for the week with hotter-than-expected inflation reports weighing.

Research Team
Research Team

On Tuesday the Labor Department reported that consumer prices had risen by 3.1% year-on-on-year in January, down from the prior month but ahead of expectations, while core inflation was also higher-than-expected. Friday’s report, where January’s producer price index saw its largest increase in five months, further prompted investors to dial back rate cut expectations. The CME FedWatch tool indicates just a 10% chance of a March cut from the Federal Reserve, and even a move in May is uncertain.

For the week the Nasdaq Composite dropped 1.3% with rate sensitive technology stocks taking some of the biggest hits. Both the Dow Jones and S&P 500 hit record highs earlier in the week, with the weakness in tech offset by gains in the broader market. The S&P 500 achieved its eleventh record closing high this year but a pullback on Friday pushed it to a weekly loss of 0.4%, its first weekly decline since the start of the year. The yield on the 10-year Treasury note rose for the week, spiking after the two inflation reports. On Friday it had risen as high as 4.33%, its highest level since 1 December, before paring gains to end the week at 4.29%.

European equities managed to advance for the week which was packed with earnings releases and growing hopes that rate cuts from the European Central Bank wouldn’t be too far away. For the week the pan-European STOXX 600 rose 1.4% to hit a fresh two-year high, fuelled by a 2.5% rise in miners. Meanwhile the French CAC and German DAX indexes both hit all-time highs on Friday. Comments from ECB policymakers over the week signalled that the central bank shouldn’t put off rate cuts for too long. The UK FTSE 100 added 1.8% for the week even with data revealing that the economy fell into a technical recession for the second half of 2023. In more positive news the consumer price index was unchanged at 4% in January, lower than expectations.

Also slipping into a technical recession was Japan’s economy, which unexpectedly declined by 0.4% in the final quarter. This meant that its economy is now the world’s fourth larges, falling behind Germany. Despite this Japan’s Nikkei 225 continued to test its 34-year highs and advanced 4.3% for the week, supported by yen weakness. In a holiday-shortened week in Hong Kong, the Hang Seng gained 3.8%. Mainland China indices remained closed for the Lunar New Year holiday.

The value of your investment can fall as well as rise in value, and the income derived from it may fluctuate. You might get back less than you invest. Currency exchange rate fluctuations can also have a positive and negative affect on your investments. Please note that EFG Harris Allday does not provide tax advice. Past performance is not a reliable indicator of future performance. 

This document has been produced by the EFG Harris Allday research team utilising data from documents produced by EFG Asset Management (UK) Limited for use by the EFG group and the worldwide subsidiaries and affiliates within the EFG group. EFG Asset Management (UK) Limited is authorised and regulated by the UK Financial Conduct Authority, registered no. 7389746. Registered address: EFG Asset Management (UK) Limited, Park House, 116 Park Street, London W1K 6AP, United Kingdom, telephone +44 (0)20 7491 9111.