Last Week
The good news is that the stock market set new record highs on Tuesday and Wednesday. The bad news is that weak guidance from Walmart on the state of the consumer reversed those gains. The ugly news was the economic data on Friday, specifically the University of Michigan consumer sentiment index for February, came in 10% below its reading from January. That report indicated a surge in inflation expectations over the next 12 months to 4.3%, a full percent higher than the previous month’s gauge. On a related note, President Donald Trump continued to garner headlines, suggesting that he would probably announce 25% tariffs on imports of cars, semiconductors, and pharmaceuticals in April. “Bad Moon Rising” would appear to be emerging as the 2025 theme for U.S. consumers: “I see the bad moon arising, I see trouble on the way, I see tariffs and trade wars, I see inflation coming my way.”
“Help, I need someone!” Fed Chair Jerome Powell is a rock and roll fan, reportedly more of a Deadhead than a Beatles fan. Nevertheless, there was no sign of “help on the way” from the minutes of the Fed’s January monetary policy meeting, which indicated a pause in interest rate cuts until further progress on inflation. Inflation will be in the spotlight next week with the release of the January core personal consumption expenditures price index—widely seen as the central bank’s preferred inflation gauge.
Friday’s sell-off was the steepest of the year, leaving the S&P 500 with a 1.7% decline, the Nasdaq Composite down 2.5%, and the Russell 2000 with a brutal 3.7% loss. Small caps are most sensitive to the domestic economy and have exhibited increased volatility as the swirling winds of the uncertain future have whipsawed investor sentiment. Declining issues doubled advancing issues, with the Consumer Services sector faring the worst. The defensive sectors, such as Health Care and Utilities, did manage to finish in the green. The rotation to those sectors makes sense to us, given the relative valuations and the near-term uncertainties.
The bond market performed better, with the yield on the 10-year Treasury sinking 5-basis points to 4.42%, matching its lowest level of 2025. Gold continued to reach new highs, with the price per ounce approaching $3,000, while the dollar and crude oil remained steady.
This Week
Investors will get an important reading on inflation on Friday from the PCE Price Index for January, the Fed’s preferred inflation gauge.
The Tech sector could also be in focus when Nvidia releases its earnings on Wednesday.
“Don’t Speak” was a great song, but unfortunately, there is no doubt that discordance will continue to be present on the political stage.
The Chicago Sports Scene is indeed experiencing hurricanes and lightning. We have bemoaned the futility of our professional franchises ad nauseam, but our collegiate teams are not faring any better. The Fighting Illini basketball team, which looked like a contender earlier in the season, is now on the skids—missing an incredible 18 shots in a row to close out their game against the Wisconsin Badgers. We calculate the odds of missing the many shots in a row to be approximately 1 out of 250,000. The Northwestern Wildcats are in 16th place in the Big Ten, and even our beloved Chicago Maroons have slumped recently with losses at Case Western and at home versus Emory before righting the ship with an impressive win over Rochester. The Maroons have one game left and could still make the Division 3 tournament with a victory.
The stocks mentioned above may be holdings in our mutual funds. For more information, please visit www.nsinvestfunds.com.