The most recent trading week was another consequential one. In the United States, perhaps the most important news announcement was the release of the most recent FOMC meeting minutes.
The minutes came out on Wednesday and caused some market volatility. One of the key takeaways was that Trump’s tariff proposals were weighing on the Fed and would likely have an impact on both markets and financial policy. Many who have studied the issue say that tariffs will likely increase prices, but there has been some pushback on this narrative from those who say that tariffs didn’t lead to inflation in 2016.
Ultimately, the Fed is likely to keep interest rates where they are for the next several months. It’s possible that they will remain where they are for the rest of 2025 depending on the results of future inflation and other important data releases.
On Thursday, unemployment claims data was made public. Over the last seven days, there were 219,000 requests for benefits, which was slightly more than the projected 215,000 requests. Friday saw the release of the Flash Manufacturing and Services PMI reports. Manufacturing came in at 51.6 percent while the services PMI came in at 49.7 percent.
This indicates that the manufacturing sector is expanding while the services sector is beginning to slow. Although this could be just a blip in the data, it could be an indication that prices may start to come down across the board. Over the past few years, high demand for services has kept inflation high and resulting in stubborn price increases.
Also on Friday, the University of Michigan released its revised consumer sentiment and inflation expectations. Consumer sentiment went down to 64.7 percent compared to the initial reading of 67.8 percent. Inflation is expected to be 4.3 percent a year from now, which was unchanged from the original report released earlier in February. Finally, existing home sales data came out, and during the past month, there were 4.08 million sales.
The S&P 500 fell 104.52 points to close the week at 6,013, which was a loss of 1.71 percent over the last five trading days. On Wednesday afternoon, the market hit its high of the week of 6,146 before quickly reversing. On Friday afternoon, the index fell to 6,012 before reversing to close out the session.
The Dow fell by 1,266 points over the last five trading days to close at 43,428. On Wednesday afternoon, the market hit its high of 44,625 before reversing and losing ground through the close on Friday. The Dow lost 2.84 percent and is now down .63 percent for the month.
Finally, the Nasdaq fell by 428 points this week to finish at 19,524, which was a 2.15 percent drop over the past five trading days. As with the other two major indexes, the Nasdaq made its high of the week on Wednesday and its low of the week on Friday. On Wednesday morning, the market briefly exceeded 20,000 before reversing and finishing near the weekly low of 19,518.
In international news, the Royal Bank of Australia (RBA) dropped the country’s interest rate to 4.1 percent from 4.35. The move was seen as a sure thing ahead of time and resulted in a relatively muted market response. Laster in the week, the country announced that the economy had gained 44,000 jobs and that the unemployment rate ticked up to 4.1 percent.
On Tuesday evening, the Bank of Canada (BOC) announced that the country’s inflation rate stood at 2.7 percent on an annual basis. Later that week, Canada announced that its retail sales were up 2.5 percent over the past month, which was much higher than the anticipated 1.5 percent. On Wednesday, Great Britain announced that its inflation rate had increased to 3 percent on an annualized basis.
This week, preliminary GDP data for the previous quarter will be made public while the PCE Price Index for January will be available on Friday morning.