The S&P 500 (^GSPC) chugged to a record high last week as new inflation data signaled good news about the Federal Reserve’s rate cut plans.
For the week, the Nasdaq Composite (^IXIC) rose more than 2.5%, while the S&P 500 added just under 1.5%. The Dow Jones Industrial Average (^DJI) added about 0.5%.
Corporate earnings season will roll on, headlined by quarterly reports from Alibaba (BABA) and Walmart (WMT). Overall, 46 S&P 500 companies are expected to announce results during the holiday-shortened trading week.
The week ahead will bring a quieter flow of economic news. Minutes from the Federal Reserve’s January meeting and updates on activity in the manufacturing and services sector, as well as consumer sentiment, will be in focus for investors.
Markets will be closed on Monday for Presidents’ Day.
Last week, two fresh inflation readings for the month of January showed prices increased more than Wall Street had expected, but economists found positive news for markets and the Federal Reserve within the details.
When evaluating categories from both the Consumer Price Index (CPI) and Producer Price Index (PPI) that feed into the Fed’s preferred inflation gauge, the Personal Consumptions Expenditures (PCE) index, it appears that price increases likely slowed in the month of January.
Economists now expect “core” PCE, which excludes the volatile categories of food and energy, will likely clock in at 2.6% in January, down from the 2.8% seen in December. This leaves markets pricing in one or two interest rate cuts from the Fed in 2025, little changed from the week prior, per Bloomberg data. And importantly, many economists still think the Fed is closer to cutting interest rates rather than hiking them.
“We think the bar for Fed hikes remains high,” Morgan Stanley chief US economist Michael Gapen wrote in a note to clients on Friday. “The evolution of inflation expectations and second-round effects from tariffs on services inflation remain key points of emphasis. But, for now, we still think the distribution of Fed policy outcomes skews in the direction of rate cuts as opposed to hikes.”
Investors will be looking to the Fed’s minutes from its January meeting, due out for release on Wednesday at 2 p.m. ET, for any further clues on how the central bank is thinking about the path forward for interest rates.
The S&P 500 is back near a record high, and this time around, it’s not all about a handful of tech stocks. Yes, Meta (META) stock has risen for 20 straight days and its more than 25% gain this year has contributed to the S&P 500’s increase. But Meta and Amazon (AMZN) are the only Magnificent Seven tech stocks to have outperformed the S&P 500 thus far in 2025. Meanwhile, the number of companies outpacing the index’s 4% gain has soared to start 2025.
As of Wednesday’s close, 48% of the S&P 500 is outperforming the index in 2025, in line with the 25-year median and above the 29% seen last year. As Richard Bernstein Advisors CEO Richard Bernstein pointed out in Yahoo Finance’s latest Chartbook, the last two years had marked the lowest number of stocks outperforming the index in 25 years.
Freedom Capital Markets chief global strategist Jay Woods told Yahoo Finance the number of stocks participating in the current rally shows strength within the bull market but doesn’t exactly mean the benchmark index itself will shoot higher.
“If we get a bad report out of Nvidia in a few weeks [on Feb. 26], then we could see the market turn lower,” Woods said. “But we’ll still see rotation, just not into the names that are really making headlines.”
While many of the Magnificent Seven haven’t been the market leaders this year, AI euphoria appears alive and well in markets. AI software company Palantir (PLTR) is the top performer in the S&P 500 in 2025, rising more than 55%, followed by Super Micro Computer (SMCI), which is also up over 50%.
Aggressive moves in other AI plays on Friday underscored this theme as investors quickly dumped some stocks and bought positions in others after Nvidia disclosed its latest equity holdings. The AI chip giant ditched positions in Serve Robotics (SERV) and SoundHound (SOUN). Both stocks sold off on the news.
Meanwhile, shares of WeRide (WRD), a Chinese autonomous driving play, saw its stock nearly double.
Economic data: S&P Global US manufacturing, February preliminary (51.2 prior); S&P Global US services PMI, February preliminary (52.9 prior); S&P Global US composite PMI, February preliminary (52.7 prior); University of Michigan sentiment, February final (68.7 prior)
Earnings: No notable earnings releases.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
