Weekly Market Update for January 10, 2025
by Jared Plotz, Director of Research
Markets, both equities and fixed income, moved lower this week. Fears of a resurgence of inflation were stoked by a hotter (i.e. stronger) jobs report in addition to rhetoric on tariffs and percolating concerns of a rising US fiscal deficit. The S&P 500 fell -1.9%, while the Nasdaq fell -2.3%. The 10-Year Treasury, an interest rate indicator, closed the week at 4.76%, up +16 bps from last week. The 6-Month US Treasury, a favorite of our US Treasury strategy, ended up +2 bps at 4.30%.
Economic data was strong this week. One measure of business confidence reached an 18-month high and showed “new orders” for services expanding at the fastest pace in nearly three years. Job Openings (JOLTS) for December were higher than expected, with over eight million vacancies – a sign that businesses are looking to hire. Friday’s monthly employment report showed that the US added 256,000 jobs in December – 100,000 more than expected – while the unemployment rate ticked down to 4.1%. A stronger labor market is often viewed as one contributor to inflation and a reason for the Federal Reserve to be less aggressive lowering benchmark rates.
Speaking of the Federal Reserve, many members echoed an opinion this week that the inflation fight is not yet done. This is partly attributed to the most recent uptick in inflation readings and employment/wage growth. However, according to the group’s minutes from its last meeting, it also originates from the impacts of potential changes to government trade and immigration policy. The rise in interest rates this week was led by a combination of stronger economic data and a Fed that is less confident in the speed at which inflation will return to its 2% target.
In stock portfolio news, Nvidia CEO Jensen Huang confirmed that Blackwell systems (the firm’s newest chip line) are in full production and the company is seeing expanding use cases, including into robotics. Meanwhile, Microsoft announced they would spend $80 billion over the next year building AI-enabled datacenters. While we believe the AI wave still has a long runway ahead of it, we are actively considering trims to our AI position weights over the coming weeks to manage overall exposures.
Next week brings the start to fourth-quarter earnings reporting by companies. The big banks will give us the early look starting Wednesday. On Tuesday, the PPI inflation report for December will be released, with the CPI report out on Wednesday. Both will be watched closely to determine whether the recent uptick may be the start of a broader reacceleration in prices.
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