Economic data was highlighted by consumer price inflation that came in hotter than expected, as did producer price inflation. Positive results were seen in industrial production, while retail sales fell back for the month, with perhaps weather and turn of the year seasonal effects skewing several of these measures.
Equities saw gains globally, as markets celebrated what appeared to be a less dramatic and broad tariff policy. Bonds were up slightly although yields were little changed, with foreign bonds helped by a weaker dollar. Commodities were up across the board.
U.S. stocks saw gains overall, although the week saw its share of uncertainty, mostly on the tariff front. There was a bit of a hiccup mid-week, after the especially hot CPI inflation report, which continues to push out the possibility of further Federal Reserve rate cuts in the near term. Markets turned upward with rising odds of a Ukraine-Russia peace deal, which was reportedly being discussed in Munich. As noted earlier, announcements of tariffs on steel/aluminum and ‘reciprocal’ tariffs on all countries were seen as less severe than feared, as recent tariff comments have not been reacted to as strongly as they once might have been, and the decision to not introduce full global tariffs provided some relief. Growth stocks broadly outperformed value, and large cap outgained small. By sector, technology gained nearly 4% for the week, followed by the mix of communications, materials, energy, and consumer staples. Healthcare lagged with a decline of over a percent. Real estate saw a small gain.
Economic data for the week included strength in broad manufacturing measures, while services decelerated but remained strong. Other releases were mixed, with construction spending up, while consumer sentiment declined. The January employment situation report showed slower job growth but upward revisions for prior months, while the unemployment rate fell.
Equities were mixed globally, with declines in the U.S. offset by gains overseas, as tariff news turned out more benign than feared. Bonds saw gains along with falling long-term interest rates. Commodities were mixed, with higher prices for metals and lower for crude oil.
U.S. stocks started down Monday morning with the imposition of 25% tariffs on Canada and Mexico (10% on Canadian energy and China). However, markets reversed a bit when tentative agreements (with conditions largely symbolic) were made with both countries to delay tariffs by a month or more. It’s assumed that these extensions may continue until the review of the USMCA trade agreement in 2026. The Chinese tariffs of 10% were kept, although far below the 60% advertised during the election campaign, with retaliation from China far less dramatic than feared. Now, focus has turned to potential tariffs on European goods, which are assumed to be focused on the auto industry, among a few critical goods there and elsewhere. Some economists have been reticent about assigning odds of dramatic tariffs happening, but the odds of at least some degree of broader tariff increase have risen.
Economic news for the week included the FOMC keeping short-term interest rates unchanged, while U.S. GDP for Q4 came in above-trend but below the prior quarter, and personal income/spending positive. Gains in new home sales accompanied continued positivity for home prices. Durable goods and consumer sentiment fell back.
Equities were mixed globally last week, with most regions down, although a few countries bucked the trend. Bonds were up slightly, as interest rates ticked down. Commodities were also mixed, related to uncertainty over upcoming tariff policy and a strong U.S. dollar.
U.S. stocks started off poorly on Monday along with the news from DeepSeek, noted earlier, although some of the surprise faded later in the week as markets absorbed the news as being perhaps less earth-shattering as it first appeared. By Friday, concerns over North American tariffs, also noted earlier, pulled down sentiment. Sectors were mixed for the unusual week, with gains in communications, health care, consumer staples, and financials; energy and technology each fell by 3-5%, due to different drivers. Real estate was down slightly, with little change in interest rates. Earnings reports from several technology firms appeared to offer mixed results, with much of the corporate discussion focused on the promise of AI as opposed to current earnings trends. In one of the bigger weeks for U.S. company earnings, per FactSet, just over a third of S&P 500 companies have now reported for Q4. Over three-quarters of these have noted a positive earnings surprise, and over 60% a positive revenue surprise, with the blended earnings growth rate having improved to 13.2% (which would be the best quarter since 2021 if it holds out).
In a shortened quiet week for economic releases, data included gains in existing home sales, while the leading index of economic indicators declined, as did consumer sentiment.
Equities gained, especially abroad along with a weaker U.S. dollar as fears of tariffs were dampened a bit after the inauguration. Bonds were little changed domestically, but some foreign bonds fared well with a weaker dollar. Commodities were mixed, with declines in oil.
U.S. stocks fared positively, to more record highs for the S&P 500, on a market week shortened by the MLK holiday and also included the U.S. Presidential inauguration. By sector, leaders included gains of 4% for communications services and 3% for health care, followed by technology and industrials, while energy ended up as the only down sector, with a decline around -3%. Real estate gained over a percent, despite slightly higher interest rates. Per FactSet, 16% of S&P 500 companies have reported earnings, with blended (actual plus expected) 4th quarter year-over-year earnings growth at 12.7%, about a percent higher than it was at year-end and a few tenths higher than the prior week. There is much more to come on the earnings front over the next few weeks.
Economic data included the positive news of consumer and producer price inflation coming in softer than expected, while industrial production and housing starts also saw strong gains for the month. Also, retail sales increased, albeit to a lesser degree than hoped.
Equities gained around the world, as markets celebrated tempered inflation results, causing a drop in long-term yields. Bonds fared well for the same reason of lower rates. Commodities gained, with hopes for stronger demand and some supply concerns.
U.S. stocks reversed back upward last week, as markets celebrated the Wed. CPI report, which was still sticky, but a bit cooler than expected, which drove down long-term yields. Sentiment also appeared to be helped by the Israel-Gaza ceasefire agreement, which lowers the temperature in the Middle East.
Economic data for the week included ISM services continuing to improve into solid expansion and an employment situation report for December that came in far stronger than expected.
Equities fell back, along with the positive economic news pointing to less Fed policy easing action. Bonds accordingly fell as long-term interest rates rose ever higher. Commodities fared positively, with gains in all major groups.
U.S. stocks fell back as higher interest rates continued to weigh on sentiment, with small caps now having reached -10% correction territory since late November, while large caps have held on significantly better. The week was shortened by the Thur. market closure to commemorate former President Carter. From over the weekend into Monday, reports surfaced that incoming President Trump had plans to ‘pare back’ tariff levels relative to what had been announced during the campaign (causing a drop in the value of the U.S. dollar), although he refuted these same claims, resulting in further volatility. As ISM services, JOLTs, and non-farm payrolls came in stronger than expected, it ended up being a ‘good news is bad news’ dynamic yet again, as that points to a path of the Fed moving at a slower easing path that was earlier hoped. This is especially true, as continued sticky inflation remains a wildcard. As seen by recent consumer sentiment results, plenty of speculation is swirling around possible worst case scenarios surrounding foreign trade policy this year, such as maximum tariff levels across the board, as opposed to a political likelihood of more tempered actual policy. How closely draft political policy morphs into reality will be unveiled over the next several months.
By sector, energy, health care, and materials were the only positive sectors for the week, while the downside was led by technology, financials, and consumer discretionary. Real estate also fell by -4% along with the higher interest rates. New export rules from President Biden weighed on popular chip stocks. Earnings season began in earnest Fri., with reports for Q4 rolling in over the next several weeks, which could also add to market volatility, although forecasts overall are quite good (estimate for the S&P 500 of nearly 12% year-over-year earnings growth, per FactSet).
Foreign developed market stocks ended positively in local terms, but a stronger U.S. dollar turned these negative for the week. Gains in Europe were offset by sharp declines in Japan and emerging markets. Concerns in Japan continue to be centered on the timing and magnitude of the BOJ’s expected monetary tightening policy. In Canada, Prime Minister Trudeau resigned, after a nine-year run, after a bout of recent growing unpopularity, which appears to be increasingly common with incumbent administrations around the globe, particularly as fiscal stresses are rising to the surface. In EM, Chinese stocks fell by over -4% as year-over-year inflation came in at 0.1%. While such a result might have been briefly cheered in the U.S. and Europe, levels this low border on deflation, as a byproduct of very slow consumer activity there that’s been difficult to kickstart.
Bonds fared poorly last week, with the 10-year U.S. Treasury closing at nearly 4.8%, after having reached a high for the past year during the week, and the 30-year at a rounded 5.0%. The curve has solidly un-inverted from both the 10y-3m and 10y-2y measures, with the spike in long rates having outdone the sticky short rates. Floating rate bank loans fared best with flattish results, while Treasuries and investment-grade corporate indexes each fell just shy of a percent. Foreign bonds were held down by the stronger dollar and rising rates of their own.
U.K. 30-year gilt yields reached their highest levels in over 25 years (to over 5.3%), with higher-than-expected inflation readings, weaker economic growth (concerns over stagflation), fiscal policy, and potential foreign trade effects (with the U.S.) looking ahead. This type of rising rate scenario is what some have worried about for the U.S., although having the world’s reserve currency (resulting in a strong U.S. dollar), ability to issue higher levels of debt that’s readily absorbed by global markets, and a more diversified economy generally has kept these concerns at bay domestically so far. Smaller and moderately-sized economies have fewer tools at their disposal to offset internal and external effects, not to mention a more limited market for their debt, hence the added ‘credit spread’ that higher yields imply.
Commodities rose across the board last week, with energy and metals sharing leadership, with each group up a few percent each. Crude oil rose nearly 3% last week to $77/barrel, with a conflux of seasonal demand and tighter supplies, but mostly due to the Biden administration announcement Friday of broader sanctions on Russia’s energy complex, that targeted producers, shippers, traders, and insurers, which will likely also weigh on global supplies. Natural gas spot prices rose by 8% last week, with added cold temperature forecasts across the U.S. in a peak usage period. Earlier in the week, the U.S. administration also permanently banned offshore drilling for over 600 mil. acres of the Pacific and Atlantic Oceans, which could require Congressional action to undo, and reducing potential long-term supply.
Period ending 1/10/2025
1 Week %
YTD %
DJIA
-1.83
-1.38
S&P 500
-1.91
-0.89
NASDAQ
-2.34
-0.76
Russell 2000
-3.49
-1.82
MSCI-EAFE
-0.43
-0.73
MSCI-EM
-1.50
-1.63
Bloomberg U.S. Aggregate
-0.87
-1.00
U.S. Treasury Yields
3 Mo.
2 Yr.
5 Yr.
10 Yr.
30 Yr.
12/31/2024
4.37
4.25
4.38
4.58
4.78
1/3/2025
4.34
4.28
4.41
4.60
4.82
1/10/2025
4.36
4.40
4.59
4.77
4.96
Sources: LSA Portfolio Analytics, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Deutsche Bank, FactSet, Financial Times, Goldman Sachs, JPMorgan Asset Management, Kiplinger’s, Marketfield Asset Management, Minyanville, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, Payden & Rygel, PIMCO, Rafferty Capital Markets, LLC, Schroder’s, Standard & Poor’s, The Conference Board, Thomson Reuters, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wells Capital Management, Yahoo!, Zacks Investment Research. Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return/excluding dividends. Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.
The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness. All information and opinions expressed are subject to change without notice. Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.
Posted inEconomic News|Comments Off on Weekly Economic Update -01-14-2025
In a New Year holiday-abbreviated week, economic data included an improved (but still contractionary) ISM manufacturing report, minimally-changed construction spending, and continued movement higher for residential home prices.
Equities fell globally last week, in contrast to a positive year (to say the least, in the U.S.). Bonds gained a bit as interest rates settled from recent volatility. Commodities gained along with rising prices for crude oil and gold.
U.S. stocks finished 2024 strongly, with the S&P up over 25%, representing the second straight year of gains of 20%+. Though, the full short week ended negatively, with what appeared to be some profit-taking, late seasonal adjustments, and a downgrade of Q4 U.S. economic growth as measured by the Atlanta Fed GDPNow (down from 3.1% to 2.6%). Small caps, on the other hand, had a solidly positive week. In the S&P 500 by sector, energy led with gains of over 3%, followed by utilities. The largest declines were experienced by materials, consumer discretionary (primarily volatility with Tesla), and consumer staples, each down at least a percent.
In a holiday-shortened week, economic data included declines in durable goods and consumer confidence and a rise in new home sales.
Equities gained around the world last week, with developed markets outearning the U.S. and emerging markets. Bonds fell back as a whole, as yields continued to rise due to a number of underlying dynamics. Commodities were mixed, with positivity in energy and base metals.
U.S. stocks saw gains on net for the short week, despite a pullback by Friday, with additional pressure from higher long-term interest rates. Nearly every sector saw gains, led by energy, health care, communications, and financials, while materials and consumer staples saw slight declines. Real estate earned a small gain, despite interest rates rising again. The last several trading days of a calendar year can result in some unusual market movements at times, due to lower trading volumes because of vacations and institutional portfolio repositioning, including popular ‘window dressing’ trading activity, reset of cash levels, and other rebalancing activities.
Economic data in a busy pre-holiday week included the Federal Reserve cutting interest rates, as expected, although assumptions for next year have tightened. U.S. GDP for Q3 was revised higher by several tenths, while retail sales rose with strong holiday spending, and existing home sales rose. Also positive was the Index of Leading Economic Indicators turning positive for the first time in nearly three years. On the other hand, industrial production and housing starts fell back. PCE inflation for the month was weaker than expected, although the year-over-year pace was little changed.
Equities fell globally for the week, along with the assumptions for less accommodative future policy. Bonds declined for similar reasons, as long-term yields climbed. Commodities fell back across the board, along with a stronger U.S. dollar.
U.S. large cap stocks continued their gains last week, with the S&P, Dow, and NASDAQ reaching more all-time highs, while small caps fell back. Growth outperformed value by the largest margin in over a year, led by the concentrated Magnificent 7 group. By sector, strong gains in consumer discretionary of 6% (led by Tesla and Amazon), technology, and communications offset declines elsewhere, notably declines of -4% in energy and utilities. Real estate also fell back despite the small drop in yields.
Economic data included consumer price inflation rising, but at a similar pace to the prior month, while producer price inflation ticked up at a faster pace.
Equities were mixed to down globally, with some positivity in U.S. growth and emerging markets. Bonds were down as yields rose for the week. Commodities gained on the heels of a spike in crude oil prices.
U.S. large cap stocks continued their gains last week, with the S&P, Dow, and NASDAQ reaching more all-time highs, while small caps fell back. Growth outperformed value by the largest margin in over a year, led by the concentrated Magnificent 7 group. By sector, strong gains in consumer discretionary of 6% (led by Tesla and Amazon), technology, and communications offset declines elsewhere, notably declines of -4% in energy and utilities. Real estate also fell back despite the small drop in yields.
Economic data included slight improvement in ISM manufacturing, but a slight deterioration in ISM services. The November employment report saw gains, as negative one-off conditions from the prior month normalized, although the unemployment rate rose a bit. Consumer sentiment rose slightly but was split along political lines around the election.
Equities saw gains in both the U.S. and abroad. Bonds also rose, as interest rates fell back. Commodities were mixed, with agricultural prices higher but energy lower.
U.S. large cap stocks continued their gains last week, with the S&P, Dow, and NASDAQ reaching more all-time highs, while small caps fell back. Growth outperformed value by the largest margin in over a year, led by the concentrated Magnificent 7 group. By sector, strong gains in consumer discretionary of 6% (led by Tesla and Amazon), technology, and communications offset declines elsewhere, notably declines of -4% in energy and utilities. Real estate also fell back despite the small drop in yields.
On a holiday-shortened week, economic data included U.S. GDP coming in unchanged from the initial estimate, higher home prices, but a drop in durable goods and new home sales, with some negative hurricane effects.
Equities gained globally, with foreign outpacing U.S. due to a weaker U.S. dollar. Bonds also fared positively, as interest rates fell back upon a positive reaction to the new administration’s Treasury secretary nominee. Commodities fell as fading Middle East concerns negatively affected the prices of oil and gold.
U.S. stocks continued upward, with several indexes in large, mid, and small cap reaching further all-time highs. In an abbreviated trading week, Monday started positively, with the nomination of hedge fund manager Scott Bessent for Treasury secretary, which was seen as a conventional choice. Bessent is viewed as relatively market friendly and pragmatic, while also a promoter of lower fiscal deficits and more tempered/gradual tariff policy, which removes some risk of more extreme and unanticipated trade policy repercussions. At the same time, the president-elect surprised markets by posting the intention of imposing 25% tariffs on both Mexico and Canada, our largest trading partners, in addition to an extra 10% on China, all related to flows of illegal immigrants and fentanyl, and 100% tariffs on EM countries that supported attempts to replace the U.S. dollar as the global reserve currency. However, news of a cease-fire agreement between Israel and Hezbollah had a positive influence on sentiment.
LSA Connect 