WEEKLY MARKET SUMMARY
Global Equities: Stocks were little changed during the busiest week of Q4 2024 earnings season, with the S&P 500 ending the weekly session down -0.2%. The Nasdaq Composite dipped -0.5% while the Dow Jones Industrial Average was able to stay positive with a 0.9% weekly gain. Small Caps finished the week down -0.2%. Foreign stocks were relative outperformers, bouncing on hopes that President Trump’s tariffs would be a short-lived negotiating tactic. Developed International stocks finished up 0.5% during the week while Emerging Markets led with a 1.1% weekly gain.
Fixed Income: 10-Year Treasury yields eased slightly during the week, falling to under 4.5%. Newly appointed Treasury Secretary Scott Bessent suggested that the Trump administration would attempt to exert downward pressure on long-term rates via economic policies such as tax cuts and deregulation and leave the short end of the yield curve to the Fed. The remarks signified a softer approach compared to Trump’s comments that he would “demand” the Fed lower rates immediately. High yield bonds were flat for the week, as spreads remained historically low.
Commodities: US West Texas Intermediate (WTI) Crude prices declined for a third consecutive week, ending the session trading just under $71 a barrel. China wasted no time in retaliating to broad 10% tariffs from the Trump administration with their own 15% levy on US coal and liquified natural gas, along with a 10% tariff on US crude oil. Domestically, inventories continue to build on softer demand, rising by 8.7 million barrels in the week ended January 31st, far surpassing estimates of a 1-million-barrel increase.
WEEKLY ECONOMIC SUMMARY
January Jobs Report: Nonfarm payrolls were light in January, rising to just 143,000 compared with consensus forecasts of 168,000. The soft data was more than offset by an upward revision of 51,000 to the December data, however. The unemployment rate eased to 4.0%. The strong jobs backdrop gives the Fed plenty of leeway to continue its slow trajectory on rate cuts. Average hourly earnings were a negative spot on the jobs report, up 4.1%, signaling inflationary pressure.
Manufacturing Turns Positive: The Institute for Supply Management’s Manufacturing Index unexpectedly turned positive, rising from 49.2 to 50.9 in January. Any reading above 50 indicates growth. The manufacturing strength is great news for the US economy, since the Services sector has been doing the heavy lifting for years while Manufacturing has contracted.
Earnings Update: Big tech earnings continued to roll in, with Alphabet (GOOG) and Amazon (AMZN) both reporting. Both tech giants crushed estimates for revenue and EPS, but investors demanded perfection and were unimpressed with growth from their cloud businesses. Big winners for the week included Affirm (AFRM) and Peloton (PTON), while E.L.F. Cosmetics (ELF) and Roblox (RBLX) shares were crushed after disappointing results.
CHART OF THE WEEK
The Chart of the Week a six-month look at the Roundhill Big Tech ETF, ticker MAGS, which attempts to isolate the performance of the “Magnificent Seven” stocks: Nvidia (NVDA), Meta (META), Tesla (TSLA), Amazon (AMZN), Alphabet (GOOG), Microsoft (MSFT), and Apple (APPL). Aside from Nvidia, all the “Mag 7” stocks have reported earnings for the quarter, with only Meta getting a positive reaction from investors. Oddly, the selling has occurred after mostly stellar earnings results from the big tech companies. After a multi-year run of big tech dominance, investors are getting wary of the overconcentration risk in holding the Mag 7 and are taking some gains off the table. This is likely a healthy pullback for the overall market, as investors are moving into some of the more neglected sectors, although the break in MAGS below the 50-day moving average (blue line) warrants attention.
