Market Perspective for February 2, 2025

The final full week of January was full of important news, with the main event for the week coming on Wednesday when the Federal Open Market Committee (FOMC) made its latest interest rate decision.

As expected, the Fed decided to keep interest rates in a range of 4.25 percent to 4.5 percent. In prepared remarks, Fed Chair Jerome Powell said that there was no rush to alter monetary policy and that future moves would depend on future data. On Feb. 1st, 25 percent tariffs were imposed on Mexico and Canada, which many expect to cause increases in prices.

Increases in the price of goods would necessarily cause inflation to rise, which could alter the Fed’s path. However, it’s not yet clear if the tariffs would be applied to all products coming in from those nations or if they would only apply to a select list. It has also been suggested there will be a grace period, which would delay the implementation of tariffs until details can be worked out.

On Tuesday, the CB Consumer Confidence report was issued, and it came in at 104.1. This was a sharp decline from last month’s 109.4 and was also lower than the projected 105.7. It was also revealed on Tuesday that durable goods orders fell by 2.2 percent compared to an expected increase of .3 percent.

On Thursday, fourth quarter GDP data was released, along with unemployment claims for the past seven days. The economy grew by 2.3 percent in the final quarter of 2024 compared to a projected 2.7 percent prior to the release. There were 207,000 requests for benefits compared to an expected 224,000, and this week’s figure was lower than the 223,000 who applied last week.

It was also revealed on Thursday that pending home sales declined by 5.5 percent over the past month. It was believed that pending home sales were flat in the month of January. The decline in sales is likely still caused by a lack of inventory, which means home prices and housing costs in general will likely remain elevated.

On Friday, two more important reports were made public as the Core PCE Price Index increased by .2 percent this month. In addition, the Employment Cost Index for the final quarter of 2024 increased by .9 percent. In other words, labor costs went up by .9 percent over the last three months of the year.

The S&P 500 was up .75 percent this week to finish at 6,040. It reached its low of the week of 5,980 on Monday afternoon before reversing and trending higher for the next four days. On Friday morning, the index hit its high of the week of 6,112.

Like the S&P 500, the Dow finished in positive territory closing up .56 percent to finish the week at 44,544. The market opened at its lowest point of the week, which was 44,281 before steadily gaining ground from Tuesday through Friday. On Thursday afternoon, it would reach its highest point of 45,005 before consolidating.

Finally, the Nasdaq would also finish higher this week by 1.31 percent to close at 19,627. The index made its low of the week on Monday afternoon when it dipped to 19,252 before reversing and climbing higher over the next few days. On Friday morning, the market reached its high of the week at 19,961.

In international news, Australia announced Tuesday that inflation was up .2 percent over the final quarter of 2024. On Wednesday, the Bank of Canada (BOC) announced that it had reduced the country’s main interest rate to 3 percent from 3.25 percent. The European Central Bank (ECB) followed suit on Thursday, reducing the Eurozone’s main interest rate from 3.15 percent to 2.9 percent.

The upcoming week should be another consequential one. The ISM Manufacturing PMI will be released on Monday while the JOLTS report comes out on Tuesday. Nonfarm payroll reports come out on Wednesday and Friday while unemployment claims data will be released on Thursday morning as usual.

New Zealand and Canada will announce employment change data on Tuesday and Friday while Great Britain will announce its latest interest rate decision on Thursday.

Market Perspective for January 26, 2025

Market Perspective for January 26, 2025

The past week was an interesting one as President Trump’s second term officially began on Monday. Market participants and observers will no doubt spend the next several months looking for clues as to how Trump’s policies will impact the markets and monetary policy going forward.

Trump has proposed 25 percent tariffs on goods coming from Mexico and Canada, and he also proposed an additional 10 percent tariff on goods coming from China. Tariffs may also be imposed on imports from countries located inside of the European Union (EU). Although they were not put into effect on the first day of his term, it was announced on Wednesday that they will be imposed starting February 1st.

There were only a few scheduled news releases last week, and the first one came on Thursday when unemployment claims data for the past seven days was made public. Over the last seven days, 223,000 people filed for benefits compared to an expected 221,000.

On Friday, the Flash Manufacturing PMI and Flash Services PMI reports came out. For the first time in multiple years, manufacturing came in above 50, which signals a period of expansion. The report came in at 50.2 percent compared to an expected 49.8 percent. The services number was 52.8 percent, which was lower than the expected 56.4 percent. Also on Friday, the University of Michigan released its revised consumer sentiment number, which was 71.1 compared to an expected 73.3.

The S&P 500 was up by 1.86 percent over the past five trading days to close at 6,101. On Tuesday morning, the market made its low of the week at 6,008 before reversing and spending Wednesday and Thursday advancing. On Friday morning, the market made its high of the week at 6,122, which is a new record.

As with the S&P 500, the Dow was also up this week closing 2.06 percent higher over the past five trading days to finish at 44,424. On Tuesday, the market made its weekly low at 43,766 before turning around and climbing to 44,523 on Friday afternoon.

The Nasdaq was up 1.46 percent to finish at 19,954 at the close of trading on Friday. The market made its low of 19,620 on Tuesday morning and made it high of the week on Friday morning when it reached 20,106.

Investors who have exposure in foreign markets were likely interested in the bevy of news that came from Japan, Canada and elsewhere. Early Friday morning, the Bank of Japan (BOJ) raised the country’s interest rate to around .5 percent from around .25 percent. During the news conference held after announcing the decision, the BOJ said that further hikes could be coming.

On Thursday, Canada announced that retail sales were flat over the last month while core retail sales were down .7 percent. The nation had previously announced on Tuesday that inflation was down .4 percent over the last month and had ticked down to 2.4 percent from 2.6 percent on an annualized basis. Also on Tuesday, New Zealand announced that inflation was up .5 percent over the previous quarter.

There are going to be several consequential news releases over the next five trading days in the United States and abroad. On Wednesday, the Federal Reserve makes its next rate decision, and it’s believed that the Fed will stand pat at 4.5 percent. On Thursday, GDP and unemployment claims data will be released while the PCE Price Index will be released on Friday. Australia, Canada and several nations within the EU will release inflation data while Canada and the European Central Bank (ECB) will join the US in making interest rate decisions.

Market Perspective for January 20, 2025

The first full trading week in January was quite volatile as the market anticipates a number of policy changes that will likely have an impact on stocks, bonds and currencies when Donald Trump takes office.

The first major news release came out on Tuesday when the Price Producers Index for December was made public. It was reported that Core PPI was flat while overall PPI was up .2 percent. Analysts had expected Core PPI to increase by .2 percent while overall PPI was expected to increase by .4 percent.

On Wednesday, inflation data was released and provided some calm to jittery markets. It was revealed that Core CPI increased by .2 percent for December while overall CPI was up .3 percent. It was believed that Core CPI increased by .3 percent prior to the release while overall CPI was in line with analyst expectations. On an annualized basis, inflation rose from 2.7 percent to 2.9 percent.

Thursday saw the release of retail sales data in addition to unemployment claims data for the previous seven days. Core retail sales as well as overall retail sales were up by .4 percent over the last month, which was lower than the projected .5 percent and .6 percent increases, For the past week, there were 217,000 claims for unemployment benefits, which was higher than the projected 210,000 claims prior to the report’s release.

On Friday, Treasury Secretary Janet Yellen announced that extraordinary measures would begin on Tuesday. Those measures are designed to ensure that the government doesn’t default on its financial obligations after the nation hits its debt limit. A default could happen at some point in the summer if the debt ceiling isn’t increased or abandoned altogether.

The S&P 500 finished the week up 3.61 percent to close at 5,996. It made its low of the week on Monday morning when it dipped to 5,981 just before noon that day. The market then reversed and would finish at its weekly high. Despite the strong gains over the past five trading days, the index is still down about 1 percent for the month.

Like the S&P, the Dow also finished the week up more than 3 percent closing at 43,487 at the end of trading on Friday. The two indexes were also similar in that they made their lows of the week on Monday. On Monday, the Dow dipped to 41,957 before reversing and closing just off its high of the week of 43,632.

Finally, the Nasdaq finished at 19,630, which was a gain of 3.87 percent for the week. It made its low of the week on Monday morning when it dipped to 18,882 and would make its high of the week of 19,687 on Friday afternoon. As with the other indexes, the Nasdaq is down for the year having lost nearly 2 percent in January.

In international news, Great Britain announced on Tuesday morning that inflation was 2.5 percent on an annualized basis, which was slightly lower than the 2.6 percent reported in December. On Wednesday, the nation announced that retail sales were up .1 percent for the month. Australia announced on Wednesday evening that the nation’s unemployment rate inched up to 4 percent despite its economy adding over 50,000 jobs in the final month of 2024. It was announced early Friday morning that Japan will likely increase the nation’s key interest rate next week.

The upcoming week is going to feature a significant number of events, besides the inauguration of President-Elect Trump on Monday. On Friday, Flash Services and Flash Manufacturing PMI reports will be made public, and several European countries will release their own such reports on Thursday evening and early Friday morning.