Stocks Gain on Tame Inflation Report; Bonds Flat

The Dow (+2.2%), NASDAQ (+2.3%) and S&P 500 (+1.9%) posted sharp gains last week.  Meanwhile, taxable bonds and tax-free municipal bonds were relatively unchanged, as they gained less than 0.1%.  The 10-year Treasury yield finished the week unchanged at 4.00%.

The Federal government continues to remain shut down, so very little economic data was reported.  However, the Consumer Price Index (CPI – the most recognized measure of inflation) rose 0.1% to 3.0%, but that was lower than economists’ and investors’ expectations.  As a result, stocks rallied sharply on the news, as it seemed to solidify that the Fed will cut interest rates at its next meeting, which is scheduled for Wednesday.  Anything other than a 0.25% interest rate cut will be met with sharp movements in the markets in one direction or another.

Corporate earnings continue to pour in and have generally been better than expected.  Plus, the tone of CEOs has been largely positive with their outlook and a relatively solid consumer heading into the holiday season.  That said, the BIG earnings reports come out this week from many of the largest tech and AI-related companies (Microsoft, Apple, Amazon, Meta, and Alphabet) that have dominated the headlines and have led the markets the past 2 – 3 years.  Plus, President Trump is scheduled to meet with President Xi of China this week to negotiate trade deals, as the two largest economies are amid a trade war.  So, between the Fed rate cut, significant corporate earnings reports, and the summit with China, there is a huge week ahead.  Let’s hope it concludes favorably.

Have a great day and terrific week!

^{Source:  Yahoo Finance}

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^{The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. Government bonds and Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.}