Market Nears Record Highs as Investors Eye Fed Minutes and Economic Data This Week.
The S&P 500 (^GSPC) reached a record high last week, driven by new inflation data suggesting favorable conditions for the Federal Reserve's rate cut plans. For the week, the Nasdaq Composite (^IXIC) rose more than 2.5%, while the S&P 500 added just under 1.5%. The Dow Jones Industrial Average (^DJI) increased by about 0.5%.
This week, investors will focus on the minutes from the Federal Reserve's January meeting, due for release on Wednesday at 2 p.m. ET. Additionally, updates on manufacturing and services activity, as well as consumer sentiment, are expected.
The corporate earnings season continues, with reports from Alibaba (BABA) and Walmart (WMT) among the highlights. Overall, 46 S&P 500 companies are scheduled to release results during the holiday-shortened trading week.
Last week, fresh inflation readings for January showed prices rising more than Wall Street had anticipated. However, economists found positive news within the data for both markets and the Fed. Key categories in the Consumer Price Index (CPI) and Producer Price Index (PPI) feed into the Fed's preferred inflation gauge, the Personal Consumption Expenditures (PCE) index. When considering those categories, it appears price increases likely slowed in January.
Economists now expect "core" PCE, which excludes volatile food and energy prices, to register at 2.6% in January, down from 2.8% in December.
This suggests markets are pricing in one or two interest rate cuts by the Fed in 2025, with little change from the previous week, per Bloomberg data. Many economists continue to believe the Fed is closer to reducing rates rather than raising them.
"We think the bar for Fed hikes remains high," Morgan Stanley chief US economist Michael Gapen wrote in a note to clients on Friday. "The evolution of inflation expectations and second-round effects from tariffs on services inflation remain key points of emphasis. But, for now, we still think the distribution of Fed policy outcomes skews in the direction of rate cuts as opposed to hikes."
Investors will look to the Fed's January meeting minutes for further clues on the path for interest rates when they are released on Wednesday at 2 p.m. ET.
While the S&P 500 is nearing a record high, it's not solely driven by tech stocks. Meta (META) stock has risen for 20 straight days, and its more than 25% gain this year has contributed significantly to the S&P 500's increase. However, Meta and Amazon (AMZN) are the only "Magnificent Seven" tech stocks to outperform the index so far in 2025. The number of companies surpassing the index's 4% gain has surged to start the year.
As of Wednesday's close, 48% of the S&P 500 is outperforming the index in 2025, which is in line with the 25-year median and above the 29% seen last year. Richard Bernstein, CEO of Richard Bernstein Advisors, noted in his latest Chartbook that the last two years marked the lowest number of stocks outperforming the index in 25 years.
The increasing number of stocks participating in the current rally reflects strength in the bull market. However, this doesn't necessarily guarantee a sustained rise for the benchmark index itself, Freedom Capital Markets chief global strategist Jay Woods cautioned.
"If we get a bad report out of Nvidia in a few weeks [on Feb. 26], then we could see the market turn lower," Woods said. "But we'll still see rotation, just not into the names that are really making headlines."
While many of the Magnificent Seven have not been leading the charge, enthusiasm around AI remains strong in the markets. Palantir (PLTR), an AI software company, is the top performer in the S&P 500 in 2025, up more than 55%, followed by Super Micro Computer (SMCI), which has gained over 50%.
Recent moves in other AI stocks highlighted this trend as investors quickly adjusted positions after Nvidia disclosed its latest equity holdings. The AI chip giant offloaded shares in Serve Robotics (SERV) and SoundHound (SOUN), which led to sell-offs in both stocks.
Meanwhile, shares of WeRide (WRD), a Chinese autonomous driving company, saw a nearly 100% increase in value.
Weekly Calendar
Monday:
Markets are closed for Presidents' Day.
Tuesday:
Economic data: Empire Manufacturing, February (-1 expected, -12.6 prior); NAHB housing market index, February (47 expected, 47 prior)
Earnings: Devon Energy (DVN), Oxy (OXY), Toll Brothers (TOL)
Wednesday:
Economic data: MBA Mortgage applications, week ending Feb. 14 (2.3% prior); Housing starts month-over-month, January (-7% expected, +15.8% prior); Building permits month-over-month, January preliminary (-2.3% expected, -0.7% prior); FOMC meeting minutes, January Fed meeting
Earnings: Carvana (CVNA), Cheesecake Factory (CAKE), Etsy (ETSY), Garmin (GRMN), Toast (TOST), Wingstop (WING)
Thursday:
Economic data: Initial jobless claims, week ending Feb. 15 (213,000 prior); Philadelphia Fed business outlook, February (25.4 expected, 44.3 prior); Leading index, January (0% expected, -0.1% prior)
Earnings: Alibaba Group (BABA), Walmart (WMT), Block (XYZ), Booking Holdings (BKNG), Rivian (RIVN), Shake Shack (SHAK), Unity (U), Texas Roadhouse (TXRH), Dropbox (DBX)
Friday:
Economic data: S&P Global US manufacturing, February preliminary (51.2 prior); S&P Global US services PMI, February preliminary (52.9 prior); S&P Global US composite PMI, February preliminary (52.7 prior); University of Michigan sentiment, February final (68.7 prior)
Earnings: No notable earnings releases.
