As we approach the end of the month, the U.S. financial markets are in for quite a week.
This week has it all: mega-cap tech earnings, the January Federal Reserve meeting, and market-moving economic data, all during the second week of a new administration. Lots of moving parts! Amid this all, it is important to remember the benefits of long-term investing, avoiding getting caught up in short-term market movements or volatility.
What are the markets telling us now, and what will this week bring? With so much activity, now is the right time for a quick update.
S&P 500: Best Start for a President Since 1985
U.S. stock market indexes were off to the races during the first week of the new presidential administration, with the broadest measure of the domestic economy, the S&P 500, having its best start for a president since 1985. It closed at an all-time high on Thursday of last week.
Tallying major stock indexes last week, the S&P 500 increased by 1.74%, the Nasdaq 100 rose by 1.55%, and the Dow Jones Industrial Average ended the week higher by 2.15%.
Q4 Earnings Season
Fourth-quarters earnings have been strong so far, especially in large banks. Big tech earnings are on deck this week. So, earnings rubber will meet the road.
According to data gathered by FactSet, the percentage of S&P 500 companies reporting positive earnings surprises, as well as the magnitude of these surprises, is currently higher than their 10-year averages.
In what may be dubbed a potentially confusing earnings season, there will most likely be plenty of unrelated noise coming from Washington this week.
There are some forecasts for “fog” this week, which only makes sense given the sheer volume of data that will be digested, especially given the unknowns out of Washington.
Earnings will be the fundamental focus of the week for stocks, with other variables surely to be in play!
January Federal Reserve (Fed) Meeting
The January Fed meeting is this week, with the decision on interest rates coming on Wednesday afternoon.
No surprises are expected regarding the benchmark overnight lending rate, with the CME FedWatch Tool indicating a 97.9% probability that the Fed will keep the key overnight lending rate unchanged as of the market close on 01/24/25.
As usual, market participants (and algorithms) will immediately look for any subtle changes in language in the official Federal Open Market Committee statement at 2 p.m. ET on Wednesday as Federal Reserve Chair Jerome Powell prepares for the press conference at 2:30 p.m. ET.
Unemployment Claims In Line / Flash Data In Line
Weekly new applications for unemployment claims were about as expected last week, coming in at 223,000 versus 220,000 expectations. However, continuing claims are at their highest level since November 2021.
So, unemployment is a mixed bag, and analysts will be paying attention to the continuing claims number. The early 2025 labor market picture is on solid footing overall.
The Flash Purchasing Managers’ Index’s (PMI) manufacturing and services data for January was mixed last week, with manufacturing growing again and services declining. The overall takeaway from the flash data was that 2025 got off to an optimistic start for business in general.
Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said: “U.S. businesses are starting 2025 in an upbeat mood on hopes that the new administration will help drive stronger economic growth. Rising optimism is most notable in the manufacturing sector, where expectations of growth over the coming year have surged higher as factories await support from the new policies of the Trump administration, though service providers are also entering 2025 in good spirits.”
As January Goes
As we approach the end of January, the adage, “As Goes January, So Goes the Year,” comes to mind. This week will shape the monthly outcome, and there will be plenty of data to digest.
This Week: Busy / Chance of Dizziness
Fan of market-moving news and events? If so, this is your week.
This week is chock full of all kinds of events: earnings from mega-cap tech (from the likes of Apple, Tesla, Microsoft, and Meta), the final trading week of January, the January Fed Meeting, GDP data on Thursday, and Core PCE (the Fed’s favorite inflation gauge) on Friday. In addition, there will likely be nonstop headlines coming out of Washington (much like last week).
It’s sure to be an active week! Let’s be sure to stay disciplined and remember the long-term goal as the headlines come through at a flurried pace this week.
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