Markets, led by Nasdaq (QQQ), roared ahead after the core Personal Consumption Expenditures (PCE) index grew by just 2.4% Y/Y in January. This is a drop from last month’s 2.6%. Markets interpreted the lighter inflation report as allowing the Federal Reserve to cut interest rates.
Whether the Fed cuts or not is of no consequence. Inflation persists month after month. The central bank is unlikely to cut rates to stimulate the economy even further. The technology sector gracefully priced in a no-rate hike scenario in the week preceding the core PCE report data. In the last week, Apple (AAPL) fell by 1.96%, and Alphabet (GOOG) lost 3.81%. Meta Platforms (META), Microsoft (MSFT), and Nvidia (NVDA) barely rose.
Zooming out on the month, Amazon (AMZN) and Meta Platforms (META) rewarded investors with an 11% and 22.5% gain, respectively. Nvidia impressed markets with its outsized growth forecast from AI-related sales. NVDA stock gained 26% in the month.
Losing Sectors
The drug manufacturing sector performed poorly in February. Amgen (AMGN), Gilead Sciences (GILD), and Biogen (BIIB) fell in the double-digit percentage. Gilead has the highest risk. On Feb. 12, it announced it would buy CymaBay Therapeutics (CBAY) for $4.3 billion or $32.50 a share, a 27% premium.
The communications services fell overall. This included AT&T (T), Comcast (CMCSA), and Verizon (VZ). Charter lost 22% when its quarterly results included an 11.5% net income decline to $1.06 billion.
