Last Week
There must be some kind of way outta here
Said the joker to the thief
There’s too much confusion
I can’t get no relief
All Along the Watchtower – Jimi Hendrix/Bob Dylan
“There’s too much confusion,” the portfolio manager told the trading desk. I can’t get any relief,” and the stock market drifted lower. Earnings, tariff talk, and economic data all contributed to the uncertain mood.
On the surface, earnings season proceeded nicely, with the pace of S&P 500 composite earnings growth rising to 16.4% from 13.1% the week earlier. A good portion of that increase came from Amazon Inc (AMZN), Uber Technologies Inc (UBER), Pfizer Inc (PFE), and Bristol-Myers Squibb Co (BMY), highlighting the strength of the digital economy and its impact on the health of our fellow citizens. The dark cloud in the earnings reports came from the uncertainty over tariff policies that was referenced by half of the companies during their quarterly conference calls. Indeed, President Trump dominated headlines with his tariff moves. Last weekend, a 25% tariff on Canada and Mexico was announced but then delayed for a month as both North American nations showed a willingness to negotiate the areas of dispute. China responded to the 10% tariff increase on its goods by establishing its own duties on imports of multiple American products.
In a hectic news week, the economic data released on Friday had the most significant impact on the financial markets. Specifically, U.S. consumer sentiment dropped 5% to a 7-month low in February, and attitudes soured even among Republicans as households took stock of what they believe will be a surge in inflation from tariffs threatened by President Donald Trump. Expectations of inflation in the year ahead jumped from 3.3% a month earlier to 4.3%, its highest reading since November 2023. Additionally, the January non-farm payrolls showed moderate job growth and an unexpected rise in wage growth. The previous months’ job growth numbers were substantially increased, once again calling into question the accuracy of these reports. Following those data releases, the stock market went from green to red, which left the S&P 500 down 0.2%, the Nasdaq Composite off 0.5%, and the Russell 2000 negative 0.4%. Advancing and declining issues were about even, with the yield on the 10-year Treasury trickling down 9 points to 4.48% and gold rising again to new record levels.
This Week
It’s another busy calendar of earnings reports, with the key economic data being the CPI release on Wednesday. The inflation rate is expected to have remained slightly under 3%. Any surprises would undoubtedly move the markets.
We are struggling to find anything constructive about the Chicago Sports Scene. The Bulls unloaded Zach LaVine, giving them some additional salary room, but now without any “superstars” to build around. We have stopped mentioning the last-place Blackhawks because what’s the point? Spring training is approaching; maybe the Cubs or White Sox will surprise us. Otherwise, it looks like 2025 will go down as if it is another year with no teams even reaching the playoffs. “Where have you gone, Michael Jordan (Joe DiMaggio)?
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