What you need to know this week

On By Littum

The feverish stock market rally after the election came to a screeching halt last week.

For the week, the S&P 500 (^GSPC) fell more than 2%, while the Dow Jones Industrial Average (^DJI) fell more than 500 points, or nearly 1.3%. The technology-heavy Nasdaq Composite (^IXIC) sank over 3%.

Two solid inflation readings and comments from Federal Reserve Chairman Jerome Powell weighed on markets last week, as growing uncertainty about the Fed’s rate path offset earlier investor excitement over Trump’s potential policy agenda.

In the coming week, a few economic data releases are expected to add to this narrative, with activity in the services and manufacturing sectors and consumer sentiment headlining the schedule.

However, earnings will bring attention back to some of the biggest names in business after a few weeks of macro and political events dominating investor mindshare.

Key among those reports will be earnings from AI leader Nvidia (NVDA), which is set to report results after hours on Wednesday. Quarterly results from Walmart ( WMT ), Target ( TGT ), BJ’s ( BJ ) and Deere & Company ( DE ) will also be in focus.

Since the Federal Reserve cut its benchmark interest rate by half a percentage point on September 18, bond yields have risen higher. The 10-year Treasury yield ( ^TNX ) rose 80 basis points between that date and the days after the election to trade near 4.5%.

That movement in rates had not been a problem for the stock market rise until last week.

While strategists have pointed out that a rise in rates supported by stronger-than-expected economic growth could be welcome news for stocks, the latest inflation data has thrown a wrench in that thesis.

On Wednesday, the “core” consumer price index (CPI), which strips out the more volatile costs of food and gas, showed prices rose 3.3% annually for a third straight month in October. On Thursday, the “core” producer price index (PPI) revealed prices rose 3.1% year-on-year in October, up from 2.8% the month before and above economists’ expectations for a 3% increase.

Later Thursday, Powell said in a speech that the Fed does not need to be “rushed” to cut interest rates given the strength of the U.S. economy. Markets moved lower on the comments and the sell-off continued Friday, with the Nasdaq Composite down more than 2.2% for the session.

“Slower progress on inflation in recent months may prompt the Fed to reassess its pace of easing going forward,” Wells Fargo’s economics team led by Jay Bryson wrote in a weekly note to clients on Friday.