Stocks, Bonds Fluctuate in Holiday-Thinned Trade: Markets Wrap

Market Overview - US stocks and bonds experienced small movements amid low trading volumes due to the Presidents' Day holiday and China's Lunar New Year, with futures on the S&P 500 remaining flat and Europe's Stoxx 600 index increasing by 0.2% [2][3] - The US inflation data released on Friday was benign, reinforcing expectations for a Federal Reserve interest rate cut later this year, with traders pricing in a strong likelihood of cuts in June and July [2][3] Sector Insights - The sentiment around equities is positive following the Consumer Price Index (CPI) report, although there is caution regarding sectors exposed to AI, as there may be significant dispersion in performance [4] - A JPMorgan Chase team highlighted the risks of AI-driven "cannibalization" for certain sectors, including software, business services, and media, suggesting a cautious approach to these stocks [5] - Goldman Sachs has introduced a new investment strategy focusing on software stocks that will benefit from AI adoption while shorting those at risk of being disrupted [6] Earnings and Economic Indicators - The current earnings season shows a growth rate of 13% for companies, contributing to a positive outlook for the S&P 500 [7] - Upcoming economic indicators, including ADP private payrolls and the minutes from the Fed's January meeting, are anticipated to provide further insights into the economic landscape [7] Future Outlook - Bloomberg strategists predict a potential retreat in global equities as the uncertain AI outlook may negatively impact megatech companies and sectors vulnerable to disruption, while bond markets may continue to rally [8]