Hope you enjoyed Super Bowl Sunday! Before the big game, markets digested news out of Washington at a frenzied pace last week, with tariffs being the talk of the town. Major U.S. equity indexes have healthily absorbed the data overall, given the sheer volume of the headlines. With so much happening in our world, here is a quick update.
Major Stock Indices
For the week ended 02/07/25, the large-cap S&P 500 fell by 0.24%, the Nasdaq 100 increased by 0.06%, and the Dow Jones Industrial Average decreased by 0.54%.
Choppy Equities
Major U.S. stock indexes had plenty to digest last week, given the rollout of tariffs as the week began. Then, we saw the subsequent rollback of some of them. Major U.S. stock indexes responded to the news flow by trading lower at the beginning of the week, clawing back some of those losses, and ending with a whimper on Friday. The result was a choppy or sideways trading week.
Overall, given the uncertainty of the tariffs, stocks stayed resilient last week. S&P 500 market volatility ended the week marginally higher and close to the flatline, just like major stock market indexes, indicating mostly overall investor calmness in a sea of changes last week.
Mixed January Jobs Data
The big economic data last week was nonfarm payrolls for January, which came in lower than expectations, showing 143,000 jobs created in January. This was below the 169,000 forecasted by Dow Jones.
The sluggish growth in payrolls during January could be partially attributed to the California wildfires and employers sitting on the fence awaiting more certainty on the new administration’s policies. Yet, December and November payrolls were revised higher.
Translation: While the headline number was a bit weak, much of the data under the hood was solid.
Markets received the data well early in the trading session last Friday but gave up the gains as the day wore on, with planned reciprocal tariffs, souring consumer sentiment (more on that in a minute), and inflationary concerns weighing on the minds of market participants.
Somewhat canceling out the softer-than-expected jobs number, the unemployment rate declined by a tick to 4.0%, and hourly wages grew. The full employment report is here.
10-Year Note Yields Fall
While tariffs are perceived as inflationary, 10-year note yields last week did not reflect this perception.
Last week, 10-year yields dropped by just over eight basis points, settling the week near 4.487%. Given that the yield was above 4.85% leading up to the inauguration, this is quite a dip, even as the headlines scream inflationary pressures.
Treasury Secretary Scott Bessent said that the president is more focused on keeping the 10-year yield low using fiscal policy than pushing for Fed rate cuts, as he did in his first term.
Earnings Growth
We are beyond the halfway point of Q4 earnings season. With 62% of S&P 500 companies having reported their Q4 results through 02/07, the blended year-over-year earnings growth rate for the S&P 500 is 16.4%.
Should this growth rate be realized, it would represent the highest year-over-year earnings growth recorded by the index since the fourth quarter of 2021, according to data from FactSet.
Consumer Sentiment Dips
Friday’s nonfarm payroll report was perhaps unusually overshadowed by University of Michigan Consumer Sentiment data last Friday, with a drop in the reading garnering plenty of attention.
The metric showed a dip to 67.8 versus expectations for a reading of 72.0, a decline from 71.1 in January’s reading. Perhaps this was not too much of a surprise given the nonstop tariff talk, but it is a big move nonetheless.
Year-ahead and long-run inflation expectations both surged from the consumer’s perspective, which led to a decline in market sentiment to end the week last week.
Could the consumer be overreacting to the tariff headlines?
Golden Age
Gold has continued to pile on the gains. Last week marked its sixth consecutive week of gains, driven by multiple factors. Some of these factors include continuing geopolitical tensions, robust physical demand, and a renewed outlook for inflation.
This Week: Powell, CPI
It’s time again for Consumer Price Index (CPI) data. This time, the impacts of potential tariffs will be weighed with the consumer inflation data for January. Early expectations are for an annual increase of 2.9% in the headline number, which would match monthly expectations of a 0.3% rise (depending on rounding).
Core CPI (which excludes more volatile food and energy) will be watched closely this week. The last reading was 3.2% annualized (below expectations).
On top of the big CPI data release on Wednesday, Federal Reserve Chair Jerome Powell is speaking at the semi-annual Monetary Policy Report before the House Financial Services Committee.
Market watchers are anticipating Wednesday as a key day this week, followed by the release of the Producer Price Index (PPI) data on Thursday. Although, with tariff talks and more policy change likely coming out of Washington, it ought to be another action-packed week each day,
The Takeaway
Financial markets have performed well thus far in 2025 despite uncertainties. And while some individual stocks may swing in a more volatile fashion than others, the diversified portfolio can be the ticket to minimizing market volatility (and yes, that includes bonds!).
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