Markets went back and forth between minor gains and losses Monday through Wednesday, struggling to retain last week’s momentum. As a rally in AI-related stocks took a breather following a strong surge, all main indexes were slightly lower through Wednesday.
The Russell 2000, a small-cap benchmark, was the only index to gain in the past three days. Seeking undervalued bargains outside the usual market leaders, investors pushed the index up, reigniting hopes that having these smaller companies join the rally would cement its viability.
With all market-moving companies already having reported, market participants turned their attention to the economic data and future interest rate decisions. Investor anxiety was therefore palpable on Wednesday in anticipation of the release of the Federal Reserve’s preferred inflation gauge.
BTC on a Tear
There was little exciting news in the market over the past few days, with one notable exception: bitcoin, which surged for five days in a row. BTC prices topped $60,000 for the first time since November 2021, as inflows into spot bitcoin ETFs accelerated. BlackRock reported a record one-day inflow of $520 million into its iShares Bitcoin Trust on Tuesday. Bitcoin is up over 40% from the start of the year, making it a top-performing asset globally.
Mixed Economic Signals
Reports published over the past few days have marred the image of perfect economic health, suggesting that the economy is cooling. The most important signal in the past week came from February’s Consumer Confidence index, which fell much further than economists had anticipated, underscoring persistent economic uncertainty. The second reading on Q4 GDP came in at 3.2%, close to the initial estimate of 3.3%, confirming the narrative of robust yet decelerating economic growth.
All Eyes on PCE
The Personal Consumption and Expenditures (PCE) report has probably never been more anticipated. After January’s Consumer Price Index (CPI) came in hotter than expected, all eyes are on the Fed’s preferred measure of inflation, PCE, which is scheduled to be published today. If January’s PCE confirms that the disinflation trend has taken a break, it may push the timing for the Fed’s first rate cut further down the road.
Three Federal Reserve officials have opined on the central bank’s monetary policy outlook in the past few days. They all confirmed that the path, scope, and speed of rate cuts would depend on the incoming economic data. Atlanta Fed President Bostic said he anticipates the first cut to arrive “sometime this summer”, while Boston’s Collins and New York’s Williams said they believe that it would be appropriate to lower rates “later this year.”
