The Investor Guide to Vanguard Funds for February is AVAILABLE NOW! Links to the February data files are posted below. Market Perspective: Don’t Expect Rate Cuts as Inflation a Risk […]
The previous trading week was full of important news that will impact monetary policy as well as market policy for the next several months. On Wednesday, inflation data for the month was released and found that it rose by .4 percent over the past month. On an annualized basis, inflation came in at 3 percent, which was slightly higher than the expected 2.9 percent.
However, some were quick to point out that the uptick in inflation could be seasonal and nothing to panic about. Regardless, the initial reaction from the market was that interest rates would likely stay where they were until at least June. Of course, nothing is guaranteed as the new administration is pushing Fed Chair Jerome Powell to reduce rates regardless of market conditions.
On Thursday, the Price Producers Index (PPI) was released and it revealed that prices rose by .4 percent in the past month. When food and energy prices were removed from the calculation, prices only rose by .3 percent over the past month. Also on Thursday, unemployment claims data was made public, and over the past seven days, 213,000 people requested benefits compared to an expected 217,000.
Friday, retail sales data was released, coming in below market expectations. Overall, sales dropped by .9 percent in January compared to an expected drop of .2 percent. For some, this put the prospect of rate cuts back on the table as falling sales numbers could be signs of weakness elsewhere in the economy. Others said that the drop was caused by the wildfires and unusually cold weather throughout the country.
In other important news, Fed Chair Powell testified in front of members of the House on Tuesday and Wednesday. Although his testimony created some momentary market volatility, most observers believe he didn’t say anything too out of the ordinary. His key message was that the Fed would cut rates if necessary but that there was no rush to act right now.
The S&P 500 had another positive week finishing up 1.14 percent to close at 6,114 on Friday. The market made its low of the week Wednesday morning when it dipped to 6,017 before reversing. It made its high of the week of 6,124 on Friday morning before giving up some ground going into the day’s close.
Like the S&P, the Dow was also positive for the week finishing up .47 percent. This represented a gain of 187 points for the index that closed at 44,546 at the end of trading on Friday. Also like the S&P, the Dow made its low of the week before reversing and closing the week near the high of the last five trading days. The weekly range was 44,133 at the low end while 44,753 was the high.
Finally, the Nasdaq was up 1.75 percent this week to close at 20,026. This was a gain of 344 points for a market that is up over 1,100 points for the month of February. Over the past five trading days, the index made a low of 19,423 on Wednesday and closed at its high of the week.
In international news, New Zealand announced that it expects inflation to drop slightly to 2.06 percent in the next quarter. Great Britain revealed that monthly and quarterly projected gross domestic product (GDP) figures beat expectations. For the month, the GDP grew by .4 percent compared to .1 percent while the quarterly figure is believed to be .1 percent compared to a drop of .1 percent. Finally, Switzerland announced Thursday morning that inflation was down by .1 percent on a monthly basis.
The upcoming week will likely be another significant one although it will likely start on a muted note as the President’s Day holiday is Monday. However, the FOMC meeting minutes will be released Wednesday while the Flash Manufacturing and Flash Services PMI reports are released on Friday. Unemployment claims data will be made public on Thursday.
The first full trading week in February offered several twists that kept market participants glued to both their trading and television screens.
Perhaps the biggest development were tariffs on China, Canada and Mexico were both levied and then suspended for a month. If implemented, there would have been a 25 percent tariff on most goods coming into the United States from Canada or Mexico. There would have been a 10 percent tariff on goods coming in from China. However, those tariffs were delayed by 30 days after those countries made concessions to President Trump.
In addition, there were a number of scheduled news reports that caused some market volatility. On Monday, the ISM Manufacturing PMI was released and came in at 50.9, which was well above the expected 49.3. This indicates that the manufacturing sector is in a period of expansion, and it’s the first time that the indicator has been above 50 since April of 2024.
On Tuesday, the JOLTS report revealed that there were 7.6 million open positions in the United States. This was down from 8.16 million last month and was well below the expected 8.01 million jobs projected before the report’s release.
On Wednesday, the ISM Services PMI was released and came in at 52.9, which was down from 54.1 last month. In addition, the ADP nonfarm payroll report was released and revealed that the economy created 183,000 new jobs, beating the consensus estimate of 148,000 prior to the report’s release.
Unemployment claims data for the past seven days was released on Thursday. In the past week, 219,000 people requested benefits, which represented an increase of 11,000 from the previous week.
Friday, the Bureau of Labor Statistics (BLS) released its own version of the nonfarm payroll report. It claimed that 143,000 jobs were added in the past month compared to an expected 169,000. However, it also revised the December jobs report upward to 307,000.
It was also revealed that the unemployment rate dropped to 4 percent and that average hourly earnings increased .5 percent over the past month. It was expected that the unemployment rate would remain at 4.1 percent and average hourly earnings would increase by .3 percent prior to the release.
Finally, the week closed with the release of consumer sentiment and inflation expectation data from the University of Michigan. Consumer sentiment came in at 67.1 while the inflation rate is expected to be 4.3 percent in 12 months.
The S&P 500 was up 1.21 percent this week to close at 6,025. On Monday morning, the index made its low of 5,929 while it would reach its high of the week of 6,095 on Friday morning. In addition to being the weekly high, it was also the index’s all-time high.
Like the S&P, the Dow was also up this week finishing 303 points higher to close at 44,303. This represented a .69 percent gain over the past five trading days, and the Dow would also make an all-time high this week. On Thursday morning, the market hit 44,927 before reversing into the close of the week.
Finally, the Nasdaq also finished higher this week advancing by 1.19 percent to close at 19,523. This was a gain of 229 points during the previous five trading days. As with the other two major indexes, the Nasdaq made its low of the week on Monday and the high of the week during the final two trading sessions.
In international news, Great Britain decided on Thursday morning to cut its main interest rate by 25 basis points to 4.5 percent. On Friday morning, Canada announced that its unemployment rate dropped to 6.6 percent after its economy added 76,000 jobs.
There will be a lot of news on the schedule this week. Inflation, price change and retail sales data will all be released in the United States, while Fed Chair Jerome Powell is scheduled to speak on Tuesday and Wednesday. In addition, China, New Zealand and Switzerland will release inflation data.
The Investor Guide to Fidelity Funds for February 2025 is AVAILABLE NOW! February Data Files Are Posted Below Market Perspective: Domestic Stocks will Outperform After Tariff Threats Foreign markets outpaced U.S. […]
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.
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