20-02-2025
Last week showed the stock market has moved on from obsessing about inflation. Here's the new playbook.
A shortened week could kick off with a new record for the S&P 500.
Last week marked the best since late January for the index SPX, which broke a two-week losing streak despite a couple of hot inflation reports – consumer and producer prices.
Last week showed the stock market has moved on from obsessing about inflation. Here's the new playbook.
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This brings us to our call of the day from Neuberger Berman co CIOs Jeff Blazek and Erik Knutzen, who write that after two years, inflation is no longer the big data to watch and a 'new dynamic is at play.'
'Last Wednesday's unexpectedly high U.S. inflation data was a significant test for this analysis, and the market took it largely in stride. That underlines our view that investors need to shift from an 'inflation mindset' to a 'growth mindset' to understand current dynamics,' Blazek and Knutzen told clients in an investor note.
And that means a market that now places more importance on growth expectations, they said.
That's a shift they have been already predicting for the fixed-income market. They noted how the past three years shorter-term bonds were volatile due to shifting inflation and interest-rate expectations.
Neuberger Berman's global head of fixed income, Ashok Bhatia, predicted at the start of 2025 that volatility would switch to longer-term bonds, as the market shifted its focus to fiscal policies and their impact on interest rate and growth expectations. The yield on the 10-year Treasury BX:TMUBMUSD10Y has seen some choppy action so far this year, currently trading back where it was in mid-December, around 4.5%.
As for equities, they said a heavy concentration in strongly performing large technology stocks offset the fact that most stocks underperformed last year.
The investors noted the new year is seeing more optimism in the economy, owing to consumer confidence, falling unemployment, rising wages and positive manufacturing surveys. Added to that is a budding rebound in China's economy and positive signs from Europe as well.
'The result since the start of the year, has been notable outperformance from U.S. value stocks, industrials, financials, higher-quality U.S. midcaps and, especially, European equities,' said Blazek and Knutzen, who expected this setup for 2025. In December, their positive outlook for stocks came with advice for clients to approach the S&P 500 cautiously and diversify for a broadening market performance.
They note the broadening performance comes as worries about inflation haven't died down, with market expectations on prices creeping higher and plenty of commentary out there about the inflationary impact of tariffs.
'And yet, aside from the prospect of tariffs, none of those things have knocked equity markets off course. And note that the sell-off triggered by President Trump's tariff announcements was accompanied by falling bond yields, affirming…that their growth implications are far more important for market prices than their inflation implications,' Blazek and Knutzen said.
'We think the initial sell-off following Wednesday's inflation release was quickly erased for the same reason. Investors know that January's inflation data has a seasonal tendency to overshoot, but we see the growth mindset at work here, too.'
U.S. stocks DJIA SPX COMP are struggling at the start of trading with Treasury yields BX:TMUBMUSD10Y BX:TMUBMUSD02Y rising and the dollar DXY up 0.4%.
Gold GC00 is climbing — both Goldman and UBS lifted their forecasts.
Key asset performance
Last
5d
1m
YTD
1y
S&P 500
6114.63
1.47%
1.97%
3.96%
22.16%
Nasdaq Composite
20,026.77
2.58%
2.02%
3.71%
26.95%
10-year Treasury
4.513
1.50
-11.70
-6.30
22.89
Gold
2926.1
-0.36%
7.12%
10.87%
44.47%
Oil
71.49
-1.35%
-6.39%
-0.53%
-8.63%
Data: MarketWatch. Treasury yields change expressed in basis points
Intel INTC shares are climbing on a report that Taiwan Semiconductor Manufacturing TSM and Broadcom AVGO are each considering deals for parts of the chip maker's business.
Constellation Brands STZ stock is rallying after Warren Buffett's Berkshire Hathaway revealed a new stake via fourth-quarter 13-F filings, and upped stakes in Domino's Pizza DPZ and Pool Corp. POOL. Ulta Beauty ULTA is slipping after it exited the beauty supply group.
Shares of several U.S.-listed China tech stocks are higher — Alibaba BABA, PDD PDD, XPeng XPEV, Li Auto LI and NetEase NTES — after President Xi Jinping's rare public meetup with the country's tech entrepreneurs. Baidu BIDU is weaker after reporting falling profits in its core business.
Southwest Airlines LUV is cutting 1,750 corporate positions, the first nonvoluntary layoffs in its 53-year history.
A Delta Air Lines DAL jet flipped over while landing in snowy Toronto on Monday. All 80 persons aboard survived, with some injuries. Delta shares are slipping.
The Empire State manufacturing survey came in stronger than expected, and a U.S. home builder confidence survey is due at 10 a.m. Federal Reserve Gov. Christopher Waller said interest rates should be kept on hold for now. San Francisco Fed President Mary Daly is scheduled to speak on Tuesday.
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These were the top-searched tickers on MarketWatch as of 6 a.m.:
Ticker
Security name
NVDA
Nvidia
TSLA
Tesla
GME
GameStop
PLTR
Palantir Technologies
SMCI
Super Micro Computer
TSM
Taiwan Semiconductor Manufacturing
INTC
Intel
BABA
Alibaba
AAPL
Apple
NIO
NIO
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