Market Insights

Stocks are climbing as worries about trade and geopolitics fade.

The S&P 500 rose 1.5 percent between Friday, February 7, and Friday, February 14. It was the first gain in three weeks. Buying focused on lagging companies and turnaround stories — especially in the technology sector.

Tariffs and geopolitical events were the big catalysts, overshadowing important inflation news. Investors were dreading the announcement of new tariffs against Europe, but the White House instead ordered officials to investigate harm from other countries’ trade practices. Like earlier moves against Mexico and Canada, the actions had little immediate impact.

“The market is breathing a bit of a sigh of relief,” BMO Wealth Management Chief Investment Officer Yung-Yu Ma told CNBC on Friday. “There is continued optimism the tariff picture won’t play out in some of the most damaging scenarios.”

There were also signs of rapprochement between the U.S. and Russia over the war in Ukraine. President Trump held a long phone conversation with Vladimir Putin and indicated they could meet in Saudi Arabia. That lifted the euro and helped fuel the rally in global stocks. (Easing of tensions could potentially help Europe overcome its energy crisis.)

Gold and oil dropped on Friday, which may reflect a lessening of geopolitical risk.

Super Micro Computer (SMCI), daily chart.

Inflation Ignored

Last week’s market gains occurred despite the consumer price index (CPI) and producer price index (PPI) rising more than expected. Investors seemed to look past the numbers because Trump’s tariff moves weren’t as harsh as feared. (Some details of inflation — especially in the large shelter category — showed progress.) Traders could be more focused on other key data points in March before the next Federal Reserve meeting.

A separate report showed retail sales dropping 0.9 percent in January, far below expectations of a 0.1 percent decline. Initial jobless claims and industrial production painted a more positive picture.

While the news was mixed, the U.S. dollar fell to its lowest level in over two months. That could reflect improving sentiment because the greenback rallied in late 2024 on worries about higher interest rates and weakness in Europe. Its relative weakness now may suggest that investors think the pendulum is swinging back toward lower rates and greater risk appetite.

Speaking of the dollar, foreign stocks continued to outperform last week, led by China and Europe. Given their long periods of lagging and lower valuations, could investors expect a further rotation toward global assets?

Comeback Plays

Last week’s biggest gainers were companies that had lagged the S&P 500 over the last year.

Super Micro Computer (SMCI) reported weak results, but it rallied after confirming it will file statements on time with the U.S. Securities and Exchange Commission. Management was also optimistic that Nvidia’s (NVDA) new Blackwell chips will boost demand for its AI servers.

Intel (INTC) had its best week since 1999 on reports that Taiwan Semiconductor (TSM) will invest in the ailing U.S. chipmaker.

CVS Health (CVS) had its best week since at least 1970 after earnings and revenue surpassed estimates. The report seemed to confirm the healthcare giant is finally turning its business around after appointing David Joyner CEO in October.

Airbnb (ABNB) and MGM Resorts (MGM) beat estimates. ABNB also plans to expand into new markets and product lines to increase monetization. MGM benefited from a rebound in conventions and gaming in Macau.

Technology was the best-performing sector overall, led by chip stocks. Communications also outperformed. Health care and financials lagged.

S&P 500, daily chart, with select patterns and indicators.

Charting the Market

The S&P 500 ended last week slightly below its January 24 record high. However it continued stair-stepping upward, with prices diving on bad news before rebounding.

China’s DeepSeek and Trump’s tariffs caused previous drops. Last week, the higher-than-expected inflation report triggered selling. However, lows occurred just two minutes after the opening bell on Wednesday. Prices then stabilized and rallied the following day.

The bounce occurred slightly above 6,000, holding a pair of weekly highs from January. That could be viewed bullishly because old resistance became new support.

The index is also above its 21-day exponential moving average and 50-day simple moving average. The moving average convergence/divergence (MACD) oscillator has continued to rise as well. Those patterns may reflect positive trend and momentum.

The Nasdaq-100 was potentially more bullish because it closed at an all-time high and its advance/decline line hit a new record last week.

Interestingly, the American Association of Individual Investors’ weekly survey had the most bearish responses since November 2023. Given the positive price action and anxiety about tariffs, are stocks climbing another “wall of worry?” That’s when investors exit positions and play catch-up as worst-case scenarios don’t occur.

Volatility has steadily declined from the beginning of the year, which may also reflect limited selling pressure in the market.

The Week Ahead

This week is cut short by the Presidents’ Day holiday. It features some mid-level economic events and more earnings.

NAHB’s homebuilder sentiment index is today, along with results from Baidu (BIDU), Arista Networks (ANET), Devon Energy (DVN), Occidental Petroleum (OXY) and Medtronic (MDT).

Housing starts, building permits and minutes from the last Fed meeting are on Wednesday. Etsy (ETSY), Carvana (CVNA) and Toast (TOST) report earnings.

Thursday has results from Walmart (WMT) and Alibaba (BABA). Initial jobless claims and crude-oil inventories are also due.

Existing-home sales are on Friday.

There are also German elections on Sunday, February 23, which may have some impact on sentiment.