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.