Last week, U.S. stocks saw solid gains, with the Dow Jones up 2.2%, the S&P 500 rising 1.8%, and the NASDAQ increasing 1.7%. The communication services sector led with a 4.0% gain, while energy lagged, dropping 2.9%. Oil prices fell 3.6% due to lower demand forecasts from the IEA and continued production growth outside OPEC. President Trump supported Market strength by softening his tariff stance on China and strong corporate earnings. Additionally, participants at the World Economic Forum in Davos shared an optimistic economic outlook for the U.S. Further news that fueled the rally included President Trump unveiling the Stargate Project, a $500 billion private sector initiative aimed at developing AI infrastructure in the U.S., seen as a significant step toward advancing technology, boosting economic growth, and creating jobs. The 10-year U.S. Treasury bond yield ended the week at 4.65%, four basis points higher than the previous week.  

U.S. & Global Economy  

The week was relatively quiet in terms of economic data. On Wednesday, the U.S. leading economic indicators for December remained flat at -0.1%, which is in line with expectations but down from a 0.4% increase in November. On Thursday, weekly jobless claims came in at 223k, slightly higher than the 221k estimate and up from 217k the previous week. On Friday, the University of Michigan’s consumer sentiment survey showed its first decline in six months, with more people expressing concerns about rising inflation and unemployment. Additionally, the S&P Flash U.S. Manufacturing PMI rose to a seven-month high of 50.1, signaling modest expansion, while the S&P Flash U.S. Services PMI fell to a nine-month low of 52.8. This week, the economic calendar gets busier with important data releases. On Monday, we will see new home sales, followed by durable goods orders and consumer confidence on Tuesday. The FOMC decision is on Wednesday, and the Fed Funds Futures markets are showing a 98% of no rate action at the meeting. Thursday and Friday’s reports on GDP and the PCE index will be key in assessing the economy’s strength and whether inflation continues to decline or remains stubbornly sticky. 

Policy and Politics 

President Trump signed a significant number of executive orders in his first week, focusing on areas such as immigration, energy, government operations, and reversing Biden-era policies. On his first day, Trump signed 26 executive orders. For comparison, in 2017, Trump signed one executive order on his inauguration day and four others in the following week. 

Geopolitical tensions remained in focus last week. Trump and Putin have both shown interest in speaking soon, with plans for a phone call and a possible in-person meeting to discuss various issues, including the ongoing war in Ukraine. Trump also revealed he is considering a 10% tariff on Chinese goods, a significant decrease from the 60% duties he had previously suggested during the campaign. Just days before his inauguration, Trump held a phone call with Chinese President Xi to discuss trade, fentanyl, and TikTok. Meanwhile, the situation between Israel and Hamas continues to be fragile, with efforts ongoing to maintain the ceasefire and facilitate further exchanges. 

Economic Numbers to Watch This Week 

• U.S. Durable Goods New Orders MoM for December 2024, prior -0.26% 
• Target Fed Funds Rate, current 4.25 – 4.50% 
• Initial Claims for Unemployment Insurance for the week of January 25, 2025, prior 223,000 
• U.S. Real GDP for Q4 2024, expected 3.10% 
• U.S. PCE Price Index YoY for December 2024, prior 2.44% 
• U.S. Core PCE Price Index YoY for December 2024, prior 2.82% 

Earnings season picks up this week, with major tech companies like Microsoft, Meta, Tesla, and Apple set to report. Investors will also be watching earnings from Caterpillar, Visa, Mastercard, UPS, and ExxonMobil. While no changes to interest rates are expected at Wednesday’s Fed meeting, all eyes will be on Fed Chair Powell’s press conference for insights on the economy, especially employment and inflation. We continue to view the economic outlook as positive, with a strong consumer, healthy jobs market, inflation on the decline, and steady earnings growth for U.S. companies. If you have any questions or need more information, feel free to reach out to your advisor at Valley National Financial Advisors.