Last week, markets were very active, beginning with a nearly 2% drop on Monday after the White House announced new tariffs, which were quickly called off later in the day, sparking a rally through Thursday. However, Friday brought another dip, triggered by a weaker-than-expected jobs report and news of potential new tariffs. For the week, the S&P 500 finished down 0.24%, the Nasdaq fell 0.53%, the Dow Jones dropped 0.54%, and the Russell 2000 was down 0.35%. The best-performing sectors were real estate (+1.13%) and technology (+0.8%), while consumer cyclical (-3.19%) and industrials (-1.23%) lagged. Crude prices dropped 2.94%, closing at $71.06 per barrel, as expectations of rising U.S. production, supported by President Trump, weighed on the prices. Treasury markets rallied modestly by the end of the week, and the 10-year U.S. Treasury bond yield ended at 4.45%, seven basis points lower than the previous week.
U.S. & Global Economy
It was a busy week for economic data, with a mix of results across several key reports. On Monday, the ISM manufacturing index for January came in at 50.9, slightly better than the 50.0 expected, while December construction spending rose 0.5%, surpassing the 0.3% forecast. On Tuesday, job openings for December were 7.6 million, still a healthy level well above pre-pandemic numbers, below the expected 8.0 million. Factory orders for December dropped 0.9%, slightly worse than the anticipated 0.8% decline. Wednesday’s ADP employment report showed 183k jobs added in January, beating expectations of 150k, while the ISM services index came in at 52.8%, lower than the forecast of 54.0%. On Thursday, weekly jobless claims rose to 219k, above the expected 214k. Friday’s U.S. employment report revealed 143k jobs added in January, falling short of the 169k forecast, though the previous month’s number was revised higher to 307k. The U.S. unemployment rate improved to 4.0%, better than the expected 4.1%.
Policy and Politics
Last week, President Trump announced new tariffs, including a 25% tax on imports from Canada and Mexico and a 10% tax on goods from China. While the tariffs on China took effect immediately, those on Canada and Mexico were delayed for a month to allow further negotiations on immigration and drug trafficking. The announcement raised concerns about higher consumer prices and potential economic disruptions, with critics warning it could worsen inflation. Mexico hinted at retaliatory measures but held off as talks continued. The White House also suggested additional tariffs could target European goods and other industries shortly. With ongoing negotiations and the possibility of more tariffs, trade tensions are expected to remain a key focus in the coming weeks.
Economic Numbers to Watch This Week
- U.S. NFIB optimism index for Jan 2025, the previous reading was 105.1
- U.S. Consumer Price Index for Jan 2025, the previous reading was 0.4%
- U.S. Producer Price Index for Jan 2025, the previous reading was 0.2%
- U.S. Weekly Jobless Claims for the week of Feb 8, 2025, the previous number was 219,000
- U.S. Retail Sales for Jan 2025, the previous reading was 0.4%
Despite recent volatility, we continue to be impressed by the resilience of the U.S. economy and Q4 corporate earnings growth that continues to deliver. This week, investors will closely watch a series of key economic data releases, including the Small Business Optimism Index, CPI, PPI, and Retail Sales. They will also be tuning in to speeches from several Federal Reserve members, hoping for clues about potential future rate cuts. In addition, earnings reports from major companies such as Cisco, Coca-Cola, McDonald’s, Applied Materials, Unilever, and John Deere will draw attention as investors assess corporate performance and outlooks. If you have any questions or need more information, feel free to reach out to your advisor at Valley National Financial Advisors.