The US stock market experienced a sharp drop on Wednesday, extending a recent downward trend. Investors are uncertain about interest rate cuts by the Federal Reserve, which has lowered their expectations from five or six cuts to just one or two. Additionally, disappointing earnings from large companies like Travelers and Prologis contributed to the decline. However, some individual stocks like United Airlines performed well, indicating strong demand in certain sectors.
US stocks showed mixed performance on Tuesday, with the Dow unchanged but the S&P 500 and Nasdaq slightly up. Investors are closely watching Wednesday's inflation report but should pay more attention to earnings season, which starts this week. Companies' performance will give more insight into how they're handling high costs. Crypto-related stocks fell with Bitcoin prices, but Alphabet and Moderna saw gains.
The S&P 500 gained this week, marking its biggest weekly increase this year, despite most stocks falling on Friday. The market was influenced by the Federal Reserve's plan for further interest rate hikes, but not all sectors performed equally. While technology stocks like Apple and Microsoft showed limited growth, financials and industrials saw improvement. Company-specific news included a decline in Nike and Lululemon shares due to revenue concerns, while FedEx shares rose after exceeding profit expectations.
The stock market is hitting record highs, with the Dow Jones Industrial Average closing in on 40,000 points. This surge is fueled by positive economic data and corporate profits. While there are still concerns about a potential recession, investors are generally optimistic.
Reddit, the popular social media platform, has also joined the stock market. But experts warn that it's a volatile investment, and investors should proceed with caution.
The Commerce Department's report on the Personal Consumption Expenditures (PCE) index is expected to show a 0.3% increase in inflation for January. This inflation measure is closely monitored by the Federal Reserve. If the Fed continues its strict economic policies to tackle inflation, it could hinder economic growth, according to economist Mark Zandi.
Headline inflation is forecast to show a 0.4% monthly increase and 3.1% year-over-year gain, with core inflation predicted at 0.3% monthly and 3.7% annually. This resilience may prevent Fed rate cuts at the next meeting. Rising gasoline prices have contributed to inflation, reinforcing the Fed's cautious approach to interest rate reductions.
