The weak sales have sparked concerns that consumer spending (the driving force behind the economic recovery since the end of the pandemic) is slowing.
After a two-week suspension, tech stock-led U.S. stock rally resumed last week as traders and investors shook better-than-expected inflation data and weaker retail sales reports.
The S&P 500 finished at 6,114 on February 14th, up 1.47% in a week. The Dow Jones closed at 44,546, up 0.55%. Nasdaq finished the week at 20,026, up 2.58%. And the small cap Russell 2000 ended at 2,279, up 0.01%.
For the Wall Street Bulls, things could have been even better without some economic reports raising concerns about the state of the US economy and the direction of monetary policy throughout the year. These data sent stocks on bumpy rides later in the week.
“Inflation has been sticky to items such as used cars and car insurance engraved,” David Russell, Global Market Strategy Director at Tradestation, told the Epoch Times.
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“This puts pressure on the Fed and the White House to step carefully at tariffs. There have been advances in the rents of the owners, but other items are moving wrong. Investors say in March. You can’t respond positively because you get more data before the key dot plot. However, if you don’t see any immediate progress in inflation, this bull market time could run out.”
The country’s central banks cannot hurry to resume interest rate cuts anytime soon, as Federal Reserve Chairman Jerome Powell repeated before the Senate committee on banks, housing and urban issues.
“We know that policy suppression too quickly or too much can hinder inflation progress. At the same time, reducing or reducing policy suppression can unfairly weaken economic activity and employment. It’s sexual.”
Skyler Winanand, chief investment officer at Dallas-based Regan Capital, expects the Federal Reserve to hold interest rates for the remainder of 2025.
“The Fed has nothing to do at this point, but wait and look forward to seeing that economic indicators are changing and suggesting advances in inflation,” he told the Epoch Times.
“If consumer prices or inflation expectations rise further, there is a good chance that the Fed’s next move will be to raise short-term interest rates.”
Rather than cutting interest rates, the Fed’s outlook for a hike has led to bond yields, rising 10-year U.S. Treasury memos above the 4.5% threshold on February 12th.
Consumer prices have been rising since September 2024, urging the country’s central bank to suspend interest rate cuts, which has helped boost bond yields. It’s a stock headwind as higher bonds lower the stock valuation.
But the major stock indexes are reflected in the robust economy, the Trump administration’s market-friendly policy outlook, and AI hype.
The weakness in sales has sparked concerns that U.S. consumer spending, which has been driving the economic recovery since the end of the Covid-19 pandemic, has slowed down.
The outlook for the weak economy helped ease bond yields, with the US Treasury bond yields falling to 4.48% on February 12th.
Winanand remains optimistic about stocks for the remainder of the year, citing the balance sheets of healthy consumers and businesses.
“Companies are making the workforce difficult, they’re making their businesses a right size, maintaining margins and growth for the future,” he said. “Stock should thread the needle this year to maintain double-digit returns.”
