The S&P 500 (^GSPC) reached a record high last week as new inflation data signaled optimism about the Federal Reserve’s potential rate cuts. The Nasdaq Composite (^IXIC) rose more than 2.5%, while the S&P 500 gained just under 1.5%. The Dow Jones Industrial Average (^DJI) increased by about 0.5%.
Economic Outlook and Federal Reserve Minutes
Investors will focus on the Federal Reserve’s January meeting minutes, which will provide insights into future rate decisions. Analysts expect “core” Personal Consumption Expenditures (PCE) inflation to decrease to 2.6% in January, down from 2.8% in December. This supports expectations of one or two Fed rate cuts in 2025.
“We think the bar for Fed hikes remains high,” wrote Morgan Stanley’s Michael Gapen, emphasizing that inflation expectations and tariff effects on services inflation remain key concerns.
Stock Market Performance and Broader Participation
The current rally is not solely driven by tech giants. While Meta (META) and Amazon (AMZN) continue to perform strongly, 48% of S&P 500 stocks have outperformed the index’s 4% gain this year, marking a broader market recovery.
“The number of stocks participating in the rally shows strength within the bull market,” noted Jay Woods, chief global strategist at Freedom Capital Markets. However, a poor earnings report from Nvidia (NVDA) could impact momentum.
AI Stocks and Market Trends
AI-related stocks remain key market drivers. Palantir (PLTR) has surged over 55% in 2025, making it the best-performing S&P 500 stock, followed by Super Micro Computer (SMCI) at 50%.
Investor sentiment shifted on Friday when Nvidia adjusted its equity holdings, selling shares of Serve Robotics (SERV) and SoundHound (SOUN), leading to sharp declines in those stocks. Meanwhile, Chinese autonomous driving firm WeRide (WRD) saw its stock nearly double.
Key Earnings Reports and Economic Data
Several major earnings reports are due this week, including Alibaba (BABA) and Walmart (WMT). Markets will be closed on Monday for Presidents’ Day.
Weekly Economic Calendar
- Tuesday: Empire Manufacturing, NAHB Housing Market Index
- Wednesday: MBA Mortgage Applications, Housing Starts, Building Permits, FOMC Meeting Minutes
- Thursday: Initial Jobless Claims, Philadelphia Fed Business Outlook, Leading Index
- Friday: S&P Global Manufacturing, Services, and Composite PMIs, University of Michigan Sentiment.
With the S&P 500 at record highs, investors remain focused on Federal Reserve policy, AI-driven stock movements, and upcoming earnings reports. While optimism persists, market volatility could still impact performance in the weeks ahead.
