Stocks Climb at End of Wild Month on Wall Street: Markets Wrap

(Bloomberg) — A rebound in big tech pushed stocks higher, while the latest economic readings reinforced bets the Federal Reserve will cut rates at least twice this year.

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Wall Street got a degree of relief after data showed inflation isn’t heating up, with traders looking past a worrisome drop in US spending to focus on prospects for Fed easing. About 400 shares in the S&P 500 rose, following a selloff that briefly wiped out the benchmark’s gains for the year. Most megacaps advanced, though the group still headed toward its worst month since December 2022. Treasuries fluctuated.

The so-called core personal consumption expenditures price index, which excludes food and energy items, rose 0.3% from December. From a year ago, it increased 2.6%, matching the smallest annual increase since early 2021. Inflation-adjusted consumer spending fell 0.5%, marking the biggest monthly decline in almost four years.

“While additional rate cuts are still probably many months away, we believe this report helps to keep one or two rate cuts on the table for 2025,” said Robert Ruggirello at Brave Eagle Wealth Management. “We believe that inflation is yesterday’s problem and that the data will continue to improve going forward.”

To David Russell at TradeStation, the PCE report provides a “little comfort” after the worrisome print on consumer prices.

“The drop in personal spending confirms the negative retail sales data we got earlier, suggesting the economy started 2025 on a soft footing,” he said. “Combined with the weak data so far in February, growth is becoming more of a concern for Wall Street. The consumer may finally be throwing in the towel.”

The S&P 500 rose 0.5%. The Nasdaq 100 added 0.5%. The Dow Jones Industrial Average gained 0.5%.

The yield on 10-year Treasuries fell one basis point to 4.25%. The Bloomberg Dollar Spot Index rose 0.1%.

“This is the ultimate double-edged sword report: PCE came in line with expectations and is relatively good news, but personal spending came in much lower than expected and is cause for concern, because of the steep drop in consumption,” said Chris Zaccarelli at Northlight Asset Management.

He also noted that we are at risk of an out-of-consensus situation, where we may be experiencing a deteriorating economy with inflation that will be less of an issue than is currently feared.

“We are still very cautious on the market given the high current valuations, the high policy uncertainty companies are forced to navigate and a consensus belief that recession risk is non-existent (or extremely low),” Zaccarelli said.

At Wells Fargo Investment Institute, Gary Schlossberg noted that consumer spending’s unexpectedly sharp decline at the start of the year, likely overstated by its strong finish to 2024, nonetheless is consistent with other data signaling a shift to more sustainable growth by the economy.

“Reduced spending joined an outsized increase in personal income to support a welcome increase in the personal saving rate,” he said. “The PCE deflator’s closely watched core measure, excluding food and energy, remained ‘sticky’ enough to keep intact market expectations of a policy “hold” by the Federal Reserve, even as inflation’s topline measure slowed.”

“Softer consumer spending and slower income growth should catch the Fed’s attention,” said Jeff Roach at LPL Financial. “Despite the deceleration in the annual pace of inflation, the monthly rate is still running hotter than the Fed would like.”

Roach says investors will continue to focus on the uncertain growth trajectory as real spending unexpectedly fall in January from weaker consumer demand.

“The odds are rising that the Fed’s next rate cut will be in June,” he said. “Whether the next cut happens then or in July is less relevant than the number of cuts by end of year. The current macro backdrop suggests only two cuts in total this year but more in 2026.”

Corporate Highlights:

• Microsoft Corp. is signaling the end of the line for Skype, the iconic internet calling and chat service it bought almost 14 years ago.
• Bath & Body Works Inc., a retailer of personal care products, was upgraded at Citigroup Inc. in the wake of the company’s results.
• Duolingo Inc.’s English-language learners were more eager users of its artificial intelligence-powered features than learners of other languages, helping drive the mobile learning platform’s sales beat for the fourth quarter.
• Redfin Corp., an online real estate company, reported fourth-quarter results that were weaker than expected on key metrics and gave an outlook that is seen as disappointing.
• Rocket Lab USA Inc. delayed the launch of its Neutron rocket to the second half of the year and issued a revenue forecast for the first quarter which fell short of estimates. This prompted analysts to either lower or place their price targets under review.

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.5% as of 10:48 a.m. New York time
• The Nasdaq 100 rose 0.5%
• The Dow Jones Industrial Average rose 0.5%
• The Stoxx Europe 600 fell 0.2%
• The MSCI World Index rose 0.2%
• Bloomberg Magnificent 7 Total Return Index rose 0.7%
• The Russell 2000 Index rose 0.5%

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%
• The euro rose 0.1% to $1.0410
• The British pound was little changed at $1.2604
• The Japanese yen fell 0.6% to 150.77 per dollar

Cryptocurrencies

• Bitcoin fell 0.5% to $83,897.49
• Ether fell 2.8% to $2,215.35

Bonds

• The yield on 10-year Treasuries declined one basis point to 4.25%
• Germany’s 10-year yield declined two basis points to 2.40%
• Britain’s 10-year yield declined three basis points to 4.48%

Commodities

• West Texas Intermediate crude fell 0.9% to $69.71 a barrel
• Spot gold fell 1.1% to $2,844.53 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Margaryta Kirakosian, John Viljoen and Chiranjivi Chakraborty.

©2025 Bloomberg L.P.