Weekly Market Watch

What a Long, Strange Week It’s Been

Last week was filled with an array of fiscal policy and geopolitical headlines. Despite the noise, both global equity and fixed income market returns were relatively muted for the week and volatility remains low. The S&P 500^® finished flat, while the rotation to outperformance of small-capitalization (cap) equities continued. Bond yields and oil prices were both slightly higher, while precious metals extended their year-to-date gains.

Market Outlook

Perhaps lost in the headlines last week were reports of solid U.S. economic data. Notably, the Consumer Price Index (CPI) release was in line with expectations and retail sales, and industrial production reports were strong as well. Solid data, combined with expectations for a strong earnings season, signals resilient economic growth. Consensus does not expect the Federal Reserve to cut rates at its January meeting; however, moderating inflation should provide room for further policy easing this year. Although we expect policy-related headlines to continue heading into the midterm elections, we view both monetary and fiscal policy stimulus, combined with productivity gains, as tailwinds for equities this year.

Table of the Week

Fourth-quarter earnings season kicked off with 7% of S&P 500 constituents having reported. The blended growth rate currently sits at 8.2%.

Early reports have mostly come from large-cap banks, with results driven by both net interest income and non- interest income. For many banks, non-interest income benefited from higher asset management fees and strong equities trading.

Estimates for the quarter suggest high single-digit growth and a widening growth gap between the overall index and the index excluding the companies known as the Magnificent 7: Apple Inc., Microsoft Corp., Amazon.com, Inc., Alphabet Inc., Nvidia Corp., Tesla Inc. and Meta Platforms, Inc.

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For definitions of indexes used in this publication, please refer to pnc.com/indexdefinitions.

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