This Weekly Financial Markets Update reviews the top market headlines: Inflation Runs Hotter than Expected in January, Retail Sales Falter in January, Inflation Dampens Small Business Optimism

Top Three Market Headlines

Inflation Runs Hotter than Expected in January: The U.S. Department of Labor reported last week that the Consumer Price Index (CPI) rose 0.3% in January versus the prior month, up from December's (revised) 0.2% pace. Compared to the prior year the CPI increased 3.1%; while this was down from a 3.4% pace in December, it exceeded the consensus forecast of 2.9%. The “core” CPI, which excludes volatile food and energy items, rose 0.4% on the month, also higher than the prior month pace of 0.3%; on a year-over-year basis, core CPI was up 3.9%, unchanged from December. Key product areas contributing to the higher readings in January included shelter (+0.6% on the month), food (+0.4%), motor vehicle insurance (+1.4%), and medical care (+0.5%).

Retail Sales Falter in January: The U.S. Census Bureau reported last week that sales at U.S. retail and food service establishments fell 0.8% in January. This fell short of economists' expectations and represented the largest month-over-month decline since March of 2023. Weakness was fairly widespread across different types of businesses during the month, with the largest declines experienced in building materials and garden equipment (-4.1% versus last month), miscellaneous store retailers (-3.0%), and motor vehicles/parts (-1.8%).The lone bright spots were furniture & home stores (+1.5%) and restaurants (+0.7%).

Inflation Dampens Small Business Optimism: Small business owners were slightly less enthused about business conditions in January, according to the latest Small Business Optimism Index. Released last week by the National Federation of Independent Business, the index fell from 91.9 in the prior month to 89.9 in January. This was its lowest level in eight months and its 25th straight month below the 50-year average of 98. The report highlighted that inflation remained the single most important concern facing business operators, followed by labor quality.

As of February 20, 2024 Week Quarter-To-Date Year-To-Date One-Year
MSCI All Country World 0.35% 3.32% 3.32% 17.79%
S&P 500 -0.35% 5.15% 5.15% 24.37%
Russell 2000 1.17% 0.40% 0.40% 6.33%
MSCI EAFE 1.47% 1.04% 1.04% 10.68%
MSCI Emerging Markets 2.11% -0.65% -0.65% 3.12%
FTSE NAREIT 0.30% -3.08% -3.08% 0.80%
Bloomberg Commodity -0.62% -1.72% -1.72% -5.56%
Barclays U.S. Aggregate -0.55% -2.01% -2.01% 2.53%