^HSIHang Seng Index

Weekly Wrap: Inflation Pressures Stocks as Reduced Selling Fails to End Traders’ Caution

The weekly wrap reveals inflationary pressure on U.S. stock valuations, alongside a reduction in short positions without traders shifting to net buying. U.S. stocks ended the week facing annual inflation of 3.7 versus expectations of 3.6 and a previous reading of 3.4, while annual core inflation rose to 2.6 versus expectations of 2.5. This surprise narrows the scope for confidence that price pressures are easing, even as U.S. industrial production accelerated and exceeded expectations. In Friday’s session specifically, the Nasdaq fell -2.15% compared with -1.07% for the S&P, reflecting greater pressure on growth stocks at the close. These are session changes, not weekly returns; the weekly takeaway is that strong activity did not provide enough protection for stocks against the inflation surprise. Traders’ positions offer a less pessimistic reading than closing market moves, but they do not confirm a bullish shift. Net E-mini S&P positions remained at -140995 contracts despite a positive weekly change of +13075, while net Russell positions remained at -61003 contracts despite a weekly improvement of +26842. The improvement therefore reflects reduced net selling, not a move to net buying. In emerging markets, net positions remained positive at +17512 contracts, but the weekly change was -20991. Overall, the easing of bearish U.S. bets coincides with a decline in bullish exposure to emerging markets, so there is no broad shift toward risk-taking.