If you blinked or weren‚??t watching the market for the past week, there was a fierce correction that has erased all but a few traces of the shock and awe of the trapdoor sell-off.
U.S. equities advanced for a sixth consecutive session, overcoming a hotter-than-expected January Consumer Price Index (CPI) reading. The Nasdaq Composite led the rally, followed by the S&P 500 and the Dow Jones Industrial Average, both of which returned to positive territory for the year.
The Russell 2000 also gained on the week and got back to the flatline. The market showed an impressive performance following the release of the Consumer Price Index for January, which prompted fears that inflation is picking up: total CPI increased 0.5% month over month versus consensus of +0.4%, while core CPI, which excludes food and energy, rose 0.3% versus consensus of +0.2%.
The headline on CPI initially pushed the Dow down by over 250 points, but the market bounced back after investors had time to further digest the report, which, on a year-over-year basis, wasn’t all that alarming: total CPI and core CPI are up 2.1% and 1.8% year over year, respectively. Those readings are in line with where they’ve been for months.
Cyclical sectors, such as financials, technology, consumer discretionary, industrials and materials, have led the charge all week, indicating that investors grew more comfortable with the inflation data, which ultimately is consistent with a growing economy and increased corporate earnings. The countercyclical health care space also outperformed, but the consumer staples, utilities, telecom services and real estate groups lagged.
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