WEEKLY MARKET SUMMARY
Global Equities: US stocks posted weekly gains as strong earnings continued to roll in, with the S&P 500 rising 1.8% during the week and reaching a new all-time high on Thursday before declining slightly on Friday. The Dow Jones Industrial Average stayed positive with a 1.2% weekly advance, while the Nasdaq Composite ended the weekly session up 1.7%. Small Cap stocks kept pace with their larger peers, gaining 1.4% during the week. Foreign stocks outperformed, with Developed Markets up 3.2% and Emerging Markets gaining 2.0%.
Fixed Income: The 10-Year Treasury yield held relatively steady at 4.63% during the week, with investors waiting for the next batch of inflation data due out January 31st. In a video appearance at the Davos Conference in Switzerland, President Trump stated his intention to “demand that interest rates drop immediately,” without elaborating on how he would exert pressure on the independent Federal Reserve. It was another good weekly session for high yield bonds, which gained 0.4% and are up 1.4% to start the year.
Commodities: US West Texas Intermediate (WTI) Crude prices eased slightly to around $75 a barrel. President Trump stated he would “ask Saudi Arabia and OPEC to bring down the cost of oil” during his Davos address and has previously stated he would do everything in his power to spur domestic drilling as well.
WEEKLY ECONOMIC SUMMARY
Leading Economic Indicators Soften: The Conference Board Leading Economic Indicators (LEI) index fell in December by -0.1% after a strong 0.3% gain in November. The decline was expected, amidst weak manufacturing demand and a slowdown in construction permits. Stock market performance was a positive point in the report, and half of the 10 underlying components showed positive performance. Despite the negative monthly reading, the Conference Board projected a 2.3% expansion in US Real GDP for 2025.
Home Sales Surprise: High interest rates have been a major deterrent to potential buyers of US housing, but in December existing home sales gained 2.2% to an annual rate of 4.24 million units, a ten-month high. Despite the added burden of higher interest payments, the average US home price hit an all-time high of $407,500 as inventory remains well below pre-pandemic levels.
Strong Start to Earnings Season: Netflix (NFLX) was the big story in weekly earnings, surging as much as 15% after strong subscriber growth far exceeded cancellations resulting from a crackdown on password sharing. The streaming service also announced price hikes, which were cheered by investors. GE Aerospace (GE) also beat earnings expectations and saw its stock price jump 9%, while American Airlines (AAL) plunged -10% on weak outlook. Things will pick up this week with Apple (AAPL), Tesla (TSLA), Meta (META), and Microsoft (MSFT) all slated to report earnings.
CHART OF THE WEEK
The Chart of the Week shows the SPDR S&P 500 ETF (SPY) going back to just before the November 2024 election. SPY “gapped up” when the results hit, and markets surged in anticipations of President Trump’s pro-business tax policies. The euphoria faded as hot inflation and worries over the impact of tariffs caused stocks to sell off in late December, yet the initial gap was never completely filled until recently. With the successful retest, markets were clear to rally to new all-time highs, which occurred this week. Earnings are likely to provide additional juice to keep the momentum going, with Large Cap Tech companies about to report.
