Despite the inflation report potentially preventing the Fed from cutting interest rates in March, the stock market seemed to recover due to strong earnings from several major companies. Chip designer Arm and rideshare giant Uber both reported better-than-expected earnings, contributing to a positive market response. Bank of America Research analysts also noted that after 79% of the S&P 500’s constituents posted fourth quarter earnings, the average earnings per share figure was 7% above Wall Streets’ consensus forecasts. They expect this trend to continue through the first half of this year.
Key takeaways:
- The S&P 500 surged more than 22% from its late October low to a record high of over 5,000 last week, but a hotter-than-expected inflation reading on Tuesday acted as a speed bump for stocks’ rise.
- Inflation, as measured by the consumer price index (CPI), rose 0.3% in January, higher than economists’ forecast for 2.9%, causing the Dow Jones Industrial Average to have its worst day since March 2023.
- Despite the inflation report, the stock market seemed to brush off the prospect of the Fed not cutting interest rates this March, with all three major indices in the green as of mid-Monday, possibly due to relatively strong earnings from several major companies.
- Companies like Arm and Uber have posted impressive earnings, with Arm's stock soaring 48% in a single day last week after projecting rising earnings and 38% revenue growth for the first quarter amid the AI boom, and Uber completing its first profitable year.