Weekly Market Recap: Equities Surge, Bond Challenges Persist, and Economic Insights Unfold

Market Overview  

Stocks finished the week higher with the S&P 500 posting another fresh record high, fueled by robust earnings from NVIDIA. Sector breadth was positive with 9 of the 11 sectors closing higher. However, small caps ended lower with interest rates rising. International markets also performed well, particularly in Europe, where private sector activity hit an eight-year high, and Japan's Nikkei reached a record level. Investor sentiment remained positive, as reflected in the American Association of Individual Investors (AAII) survey, with bullish sentiment increasing to 44%. 

 In the fixed income market, the Bloomberg Aggregate Bond Index faced its third consecutive weekly decline due to rising rates following January's inflation uptick. However, investment-grade and high-yield corporate bonds gained as large-cap equities advanced. The U.S. Treasury Department increased coupon auction sizes amid rising deficits and Fed redemptions, but an improved rate outlook is expected to attract demand. 

Commodities experienced mixed results, with West Texas Intermediate prices declining, natural gas facing challenges, and gold holding support above $2,000. Economic factors included the dollar's first weekly decline in almost two months. 

Economic Roundup  

In January, existing home sales increased, marking the highest since August. Low supply persisted, driving median prices down but keeping overall affordability at record lows. All-cash deals gained momentum, comprising over 30% of sales. Japan's January trade balance showed increased exports, reducing the trade deficit. Eurozone consumer confidence rose, though remaining below the long-term average. The weekly employment report indicated initial and continuing claims below expectations, suggesting a loosening labor market amid slowing demand. 

The Week Ahead  

The upcoming week will feature key economic data: 

- Monday: Building permits (Jan), new home sales (Jan) 

- Tuesday: Durable orders (Jan), FHFA Home Price Index (Dec), S&P/Case-Shiller Home Price Index (Dec), consumer confidence (Feb) 

- Wednesday: Revisions to Q4 Gross Domestic Product (GDP), wholesale inventories (Jan) 

- Thursday: Initial and continuing unemployment claims, BEA Total Light Vehicle Sales.  

Investors anticipate developments in these indicators, with a keen eye on potential impacts on market trends.