This Week on Wall Street – Week of February 18th

Market Commentary

Stocks kicked off the week slightly higher, testing all-time highs following the President’s Day holiday-shortened trading session. Renewed optimism on earnings and a resilient economic backdrop have propelled markets higher, with 22 S&P 500 stocks hitting 52-week highs as investors assess the latest data and corporate guidance.

This week, markets are closely watching economic updates from the January FOMC meeting minutes, key housing data, and a wave of retail earnings. With earnings season nearly complete, 78% of companies have beaten consensus expectations, signaling continued strength in corporate profits. Meanwhile, 10-year Treasury yields have retreated from their January peak of 4.8%, settling around 4.5%, though inflationary pressures could keep rates volatile.

Following a hotter-than-expected CPI report and weaker retail sales, investors are shifting their focus to the Federal Reserve’s January FOMC meeting minutes, set for release on Wednesday, alongside key housing starts and existing home sales data. Fed Chair Jerome Powell has reiterated that the central bank is in “no hurry” to cut rates. According to the CME FedWatch Tool, the odds of a March rate cut are near zero, with an 84% probability of just one rate cut this year. A weaker-than-expected homebuilder confidence report has added to concerns about the housing market and will be a key theme in upcoming data releases. 

Globally, Asian markets traded higher after Chinese President Xi Jinping signaled support for the private sector. In addition, Alibaba and Baidu report earnings this week, providing key insight into bullish sentiment as investors assess the potential drag on corporate profits amid ongoing geopolitical uncertainty.

According to our Newton Model, U.S. stocks are trailing behind their Foreign Developed and Emerging Market counterparts. Communication Services remains the top-performing sector, with Technology and Industrials following closely behind. On the other hand, Healthcare, Real Estate, and Consumer Defensive sectors are underperforming. In fixed income, floating rate and high-yield bonds continue to offer the most attractive yields, making them the strongest areas in the space. Meanwhile, the long end of the yield curve remains under pressure, facing ongoing volatility and uncertainty.

Economic Releases This Week

Monday: Markets closed for President’s Day, Philadelphia Fed Speaks

Tuesday: Empire State Manufacturing Survey, Home Builder Confidence Index, San Francisco Fed Speaksidence

Wednesday: Housing Starts, Minutes of Fed’s December FOMC Meeting, Building Permits

Thursday: Initial Jobless Claims, Philadelphia Fed Manufacturing Survey, U.S. Leading Economic Indicators

Friday: S&P Flash U.S. Services and Manufacturing PMI, Consumer Sentiment, Existing Home Sales

Stories to Start the Week