US large caps moved lower last week in the wake of higher-than-expected inflation data, with tech and other growth sectors underperforming while cyclicals (especially energy) held up better. Small and midcap benchmarks managed to finish the week in the green, as did international stocks.

Rates continued to move higher last week, particularly in the front end of the curve as 2y yields rose 19bp while 10y and 30y yields were up just 3bp. Investors recalibrated their bets regarding the forward path of Fed policy, with the chance of a 50bp hike at the upcoming March FOMC meeting rising from ~30% pre-CPI print to roughly 60% afterwards. By the end of the week, investors were pricing in between six and seven 25bp hikes by year-end.

Commodity prices edged higher last week, with oil surging on Friday as the
situation in Ukraine began to look increasingly tenuous. West Texas Intermediate finished the week at $93.10/barrel, its highest level since September of 2014.

Economic data was mixed last week. CPI rose +0.6% sequentially which was above consensus expectations, as core CPI reached +6.0% y/y while headline CPI printed at +7.5%. Initial jobless claims fell for the 3rd consecutive week as the omicron-driven uptick continued to fade. And finally, the University of Michigan Consumer Sentiment index came in much lower than expected in the preliminary February reading, as the current conditions component fell nearly 5 points while future expectations were down nearly 7 points. Encouragingly though, long term (5-10y) inflation expectations were unchanged from January at +3.1%.