Last Week
Against the backdrop of a difficult and unsettling week domestically, financial markets pulled back modestly, with all major equity indices finishing slightly lower: the S&P 500 -0.4%, the Nasdaq Composite -0.1%, and the Russell 2000 -0.3%. Advancing and declining issues were even, with the interest rate-sensitive industry sectors faring the worst and Basic Materials and Energy the best. Commodity prices rallied sharply with precious metals surging to new record levels and crude oil bouncing over 3% as the U.S. Dollar dove 2%. The yield on the 10-year Treasury was unchanged at 4.24%, 5 basis points off its highest level over the last 6 months.
Following the holiday on MLK Day, the market faced a steep sell-off on Tuesday after President Donald Trump threatened to impose tariffs on EU countries that did not support his bid to take over Greenland. At the World Economic Forum in Davos, Switzerland, Trump said he intends to begin negotiations “immediately” to pursue control of the territory. The markets rallied back when Trump ruled out using military force and later suggested that they had reached an agreement on the framework for a deal.
Earnings season provided no significant highlights, with blended growth of S&P 500 results unchanged at 8.2% for the quarter. The Magnificent 7 accounts for half of the entire projected gain, with those companies releasing results over the next two weeks. Shares prices of reporting companies have been quite volatile, with Intel shares dropping 17% last week following disappointing results, so fasten your seatbelt.
This Week
Earnings season will be in full swing with 103 S&P 500 companies reporting results, including Apple, Microsoft, Meta, and Tesla.
The FOMC meets midweek, and the odds are high that it will leave rates unchanged. Investors will focus on Chairman Jerome Powell’s press conference on Wednesday afternoon for clues on the timing and pace of future easing.
Other economic data will include consumer confidence, durable goods orders, jobless claims, PPI data, and the Chicago PMI.
Geopolitical developments could overshadow everything else, presenting risks that should not be ignored.
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