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Financial Market Update – Week of 02/20

February 20, 2023

Major U.S. stock indexes digested hotter-than-expected Consumer Price Index (CPI) data last week and finished the week in a mixed fashion, while bond yields rose.

Overall, the S&P 500 shed 0.28%, the Nasdaq 100 increased by 0.43%, and the Dow Jones Industrial Average was essentially flat for the week—lower by 0.13%.

Hot CPI Data

Lower prices? Not so fast. CPI for January came in hotter-than-expected at a 6.4% year-over-year rise versus estimates for 6.2%. On a month-over-month basis, data showed a 0.5% increase in consumer pricing vs. the 0.4% expected.

The usual suspects were cited for the rise; necessities like shelter (including rent), energy, and food all saw prices climb in January.

Rising Bond Yields

Government bond yields rose last week, reaching three-month highs for both 2- and 10-year notes. 

As major U.S. stock indexes finished mixed last week, the 10–year note yield advanced, closing the week at 3.827%. The higher-than-expected CPI data could give the Fed what it needs to continue a more hawkish and aggressive rate-hiking campaign.


The chances of a 50-basis-point rate hike at the March Fed meeting have been rising. On January 19th, the probability was 2.5%.  

As of February 10th, and before last week’s data (including CPI and Producer Price Index), the probability of a 50-basis-point hike in March was 9.2%. 

As of Friday, February 17th, data showed a probability of 18.1% for a 50-basis-point hike in March, according to the CME FedWatch Tool.

A 25-basis-point hike in March remains the most probable, at 81.9% at the close of last week.

Earnings Season

Expectations were on the low side coming into earnings season, amid the market backdrop of inflation and higher interest rates.

With earnings season nearing its end, 82% of S&P 500 companies have reported results. For Q4, the blended earnings decline for the S&P 500 is -4.7%, according to data from Factset.

68% of S&P 500 companies have reported a positive earnings per share (EPS) surprise, and 65% of S&P 500 companies have reported a positive revenue surprise.

Retail Sales Shine

Last week’s bright spot data-wise was retail sales for January, which showed an impressive monthly jump of 3% versus 1.9% Dow Jones estimates. Americans spent heavily in January, even with inflation rising and interest rates. 

That might have you saying: What gives? Well, the retail sales data is not adjusted for inflation, so the massive spike above expectations may be a bit inaccurate. With that said, the 3% monthly spike in retail sales surely outpaces the 0.5% increase in inflation for January. So, let’s call it a net 2.5%% gain for our purposes.

Credit cards. Americans love to spend. Banks love to see it with these higher interest rates. Consumer credit card balances increased by $61 billion to reach $986 billion, surpassing the pre-pandemic high of $927 billion in Q4 2022, according to data from the New York Fed.

With the average credit card interest rates ranging from 16.98% – 25.08% right now, it is an opportune time to be aware of spending habits and avoid carrying balances. For many Americans, using credit cards has been the only way to continue buying necessities amid persistent inflation.

This Week

Though U.S. stock and bond markets are closed on Monday for Presidents’ Day, this shortened week includes several important events. Wednesday features Federal Open Market Committee (FOMC) meeting minutes, with quarterly gross domestic product (GDP) on Thursday and Core Personal Consumption Expenditures (PCE) Price Index on Friday.

The Core PCE Price Index should garner the most attention, being the Fed’s preferred inflation gauge. Core PCE showed a 4.4% jump year-over-year in last month’s reading, its smallest increase since October 2021. Folks will want to see if it comes in hot like CPI did last week.

 The Takeaway

CPI data was above expectations for the first time since the October 2022 data release. The Fed has broadcasted previously that rate hikes will persist and be “data-dependent.” So, the attention turns to the March meeting: Will the Fed hike by 25 or 50 basis points? The Core PCE Price Index data coming this Friday should factor into the Fed’s decision-making process.

The market may also get some clues Wednesday via the FOMC meeting minutes. Folks will be listening to get the most current pulse on the Fed’s mood. 


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