Wall Street Today | Super Bowl Hangover Session Sees Low Volume Dow Record

The market is seeing “a little bit of profit taking” on Monday, according to James Ragan, director of wealth research at D.A. Davidson, told MarketWatch. The speed and scope of the stock market rally, with the S&P 500 rallying more than 7% over five weeks, makes some traders nervous.

“Most people will be fixated on this week’s inflation numbers, but there’s also a potential tug-of-war between how extended the current market rally may be versus the buzz surrounding the S&P 500 topping 5,000,” said Chris Larkin, managing director for trading and investing at E-Trade from Morgan Stanley.

“While it’s true the S&P has often pushed higher after crossing ’round-number’ thresholds like this one, it hasn’t always done it after the type of rally that has unfolded since late October,” he said in emailed comments.

Larkin noted that since 1968, whenever the S&P rallied at least 20% over a 70-trading-day period, as it did between Oct. 27 and last Thursday, “more often than not it was lower two weeks later.”

The Federal Reserve under Chair Jerome Powell might never live down its misguided insistence on "transitory" inflation and its delayed decision to raise interest rates to slay the beast. Some Fed watchers think the central bank is making another policy mistake by waiting too long to start cutting rates, thereby risking a hard landing for the U.S. economy.

High-interest rates tighten financial conditions and exacerbate the housing market's affordability crisis. They also stifle clean-energy investments and stress household balance sheets, says Rakeen Mabud, chief economist at the Groundwork Collaborative, a progressive economic advocacy group. "It's pretty clear to me that the Fed needs to cut rates immediately," Mabud says, and he isn't alone.

US consumers' short-term inflation expectations were unchanged in January even as price-change outlooks for various items declined to multi-year lows and overall medium-term inflation projections eased, the Federal Reserve Bank of New York said Monday.

Median inflation expectations last month held steady at 3% at the one-year ahead horizon, according to the regional Fed's Survey of Consumer Expectations. The projected short-term price changes fell for all goods tracked in the survey, with the gas component dropping to the lowest since December 2022, while those for food and rent hit the lowest since March 2020 and December 2020, respectively.

Overall, the three-year inflation outlook in January dropped to 2.4% from 2.6%, while the five-year estimate was unchanged at 2.5%. Median home price growth expectations were 3%, unchanged for the fourth straight month, the New York Fed said.

Bitcoin traded above $50,000 after 1 pm EST on Monday for the first time since December 2021, as demand for recently launched spot bitcoin ETFs remains robust.

The largest cryptocurrency has risen 13% over the past seven days, according to CoinDesk data. It has climbed 11% this year, building on a more than 150% gain in 2023. However, bitcoin is still down roughly 28% from its all-time high of $68,990 in November 2021.

The latest rally appears to be driven by spot-market demand, which has driven a significant spike in bitcoin's trading volume, according to Sean Farrell, head of digital-asset strategy at Fundstrat. "A substantial portion of this volume is likely entering the market via spot ETFs chasing the positive weekend price action," Farrell wrote in a Monday note.

U.S. oil futures stretched their gains into a sixth consecutive session on Monday, with prices settling at their highest for the month, while global benchmark Brent crude finished with a modest loss. The mixed trading for oil prices came as traders weighed global demand expectations and prospects for supply disruptions against rising tensions in the Middle East.