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Wall Street Navigates Inflation Reports, Gains Momentum

Wall Street demonstrated resilience last week, navigating through two significant inflation reports and tariff discussions to achieve notable market gains. On Valentine’s Day, the S&P 500 approached a new all-time high, ultimately concluding Friday’s trading with only a slight loss. By the end of the week, the S&P 500 increased by 1.47%, the Nasdaq Composite rose by 2.58%, and the Dow Jones Industrial Average added 0.55% to its total.

The week began with a generally positive tone, but markets faced a setback following a consumer inflation report released on Wednesday, which was hotter than anticipated, impacting the S&P 500 and Dow. The major averages rebounded strongly on Thursday, propelled by two key pieces of encouraging news. The stock market was closed on Monday in observance of Presidents’ Day.

Firstly, data on wholesale inflation from the previous week indicated that the Federal Reserve’s preferred inflation metric, known as the PCE index, could be less troubling than previously expected, paving the way for a brighter economic outlook. The market momentum intensified when President Trump announced that reciprocal tariffs on imports from U.S. trading partners would not be enacted immediately, further boosting investor confidence.

Key Performers and Movements

Within the portfolio, DuPont stood out, achieving a remarkable 9.9% increase for the week, with most of these gains realized on Tuesday after the company reported impressive quarterly earnings. DuPont’s stock continued to rise, reaching its highest point since November by the end of the week.

Another highlight was Apple, whose shares surged by 7.46%, marking its best weekly performance since July. This achievement stemmed from exciting developments related to Apple Intelligence in China, where the tech giant partnered with Alibaba to introduce artificial intelligence features. This partnership is seen as a pivotal move to strengthen Apple’s position in the competitive Chinese smartphone market.

In the cybersecurity sector, Palo Alto Networks and CrowdStrike also demonstrated strong performances, with Palo Alto’s stock closing only slightly down at 0.9% on Friday despite facing a brief drop following its earnings report. CrowdStrike experienced a robust week with a 7.15% increase, setting a record close earlier in the week, maintaining a fifth consecutive week of growth.

GE Healthcare was another significant player, surging 8.8% on Thursday after it reported a substantial profit beat and provided encouraging guidance for 2025, although its performance dipped on Friday.

Meta Platforms Reaches New Heights

Moreover, Meta Platforms extended its remarkable winning streak to 20 sessions, closing at an all-time high. While this ongoing success is impressive, investment discipline necessitated booking some profits, a decision executed mid-week.

During the week, actions included purchasing shares in Bristol Myers Squibb while taking profits from Starbucks, followed by a small investment in Disney, deemed undervalued following its quarterly results. In contrast, Bristol Myers Squibb and Eli Lilly were among the portfolio’s weakest performers along with Constellation Brands, which has struggled following disappointing earnings earlier this year. However, Constellation received a boost when Berkshire Hathaway disclosed a small stake, lifting shares in after-hours trading.

Looking Ahead: Economic Indicators and Earnings

This coming week is anticipated to be less eventful, as both earnings and economic data schedules appear lighter. Nonetheless, this may serve as a preparatory period leading into the subsequent week’s critical Nvidia earnings and the Federal Reserve’s favored inflation measure.

Housing will be a central theme in the upcoming week, with new residential construction and building permits data scheduled for release prior to Wednesday’s opening bell. Predictions indicate a nearly 10% decrease in housing starts for January, along with a decline in building permits, which serve as an indicator of future construction activity. Existing home sales data released on Friday is expected to show a decline as well, reflecting challenges within the housing market.

Despite the Federal Reserve’s rate cuts last year, bond yields have remained stubbornly high, continuing to affect the housing sector as mortgage rates follow these yields.

In earnings news, Texas Roadhouse will report its figures after the market closes on Thursday. As a newcomer to the portfolio, this restaurant chain has successfully attracted customers despite economic headwinds, thanks in part to its mid-range pricing strategy. With limited exposure to tariffs due to its domestic focus, the company has shown promising same-store sales growth, and analysts will be keen to see if this trend persists despite potential weather-related disruptions.

The upcoming week’s economic calendar includes crucial data points that investors will be closely monitoring:

• Monday, Feb. 17: U.S. stock market closed for Presidents’ Day
• Tuesday, Feb. 18:
  • 8:30 a.m. ET: Empire State Index
  • 10 a.m. ET: NAHB housing market index
• Wednesday, Feb. 19:
  • 8:30 a.m. ET: Housing starts and building permits
  • 2 p.m. ET: Minutes from January’s Fed meeting
• Thursday, Feb. 20:
  • 8:30 a.m. ET: Weekly jobless claims
  • 8:30 a.m. ET: Philadelphia Fed index
  • 10 a.m. ET: Leading indicators index
  • Before the bell: Walmart, Shake Shack, Hasbro
  • After the bell: Texas Roadhouse, Rivian Automotive, Block
• Friday, Feb. 21:
  • 9:45 a.m. ET: Markit manufacturing and services PMIs
  • 10 a.m. ET: Existing home sales
  • 10 a.m. ET: University of Michigan consumer sentiment

Source
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