Weekly Market Update for January 17, 2025
by Jared Plotz, Director of Research
Just like that, the pendulum swings the other way. Equity and fixed income markets both moved higher this week as inflation readings came in cooler than expected. The start to fourth-quarter earnings reports was positive, as was news of a ceasefire deal in Gaza. The S&P 500 rose +2.9%, while the Nasdaq increased +2.5%. Major stock indices are now up year to date. The 10-Year Treasury, an interest rate indicator, closed the week at 4.62%, down -14 bps from last week. The 6-Month US Treasury, a favorite of our US Treasury strategy, was largely unchanged.
This week brought key inflation readings for December. The Consumer Price Index (CPI) rose 3.2% from a year ago on a “Core” basis (ex-food/energy), a slower pace than expected and versus November. The producer equivalent (PPI) rose 3.5% on a similar basis. Meanwhile, retail sales for December rose 3.9% from a year ago, softer than economists forecasted. This suggests the economy and consumer spending, while solid, may not be overheating. The cooler inflation readings engendered a reprieve in interest rates along with more sanguine inflation commentary from Federal Reserve members. All of these signals aided Preferred securities.
The Big Banks kicked off the fourth-quarter reporting season with positive results this week. The group showed an improvement in interest margins and earnings, while noting strong investment banking and trading activity. The index comprising bank stocks rose 8% on the week.
Taiwan Semiconductor – not a portfolio holding, but the largest contract manufacturer of Nvidia’s advanced chips – jumped higher after laying out an expectation for its AI revenues to double this year and grow at a 40% clip over the coming five years. This is an encouraging sign for our AI positions, like Nvidia. Minnesota-based United Healthcare’s report showed profits above expectations. Though shares fell as investors remain concerned over the trend of higher healthcare costs, the company’s growth expectations remained consistent for 2025.
Next week, we, and the markets, will be closed on Monday in observance of Martin Luther King Jr. Day. Since the economic calendar will be light, corporate earnings will set the tone for the market. Many regional banks, as well as healthcare and transportation companies, are on the docket. An upbeat tone is likely.
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