The S&P 500 (^GSPC) just had its best week since the November election as weaker-than-expected inflation data eased concerns that the Federal Reserve could rule out interest rate cuts throughout 2025.
For the week, the S&P 500 rose more than 3%, while the tech-heavy Nasdaq Composite Index (^IXIC) gained more than 2.6%. The Dow Jones Industrial Average (^DJI) led the gains, surging nearly 4%.
Markets will be closed Monday for Martin Luther King Jr. Day, focusing all attention on the inauguration of President-elect Donald Trump. Investors have been closely watching where Trump's tariffs and tax policies will land and their ultimate impact on U.S. businesses.
Investors are set for a light economic calendar, which includes updates on services and manufacturing activity as well as an upcoming update on consumer confidence.
In corporate news, 43 S&P 500 companies are expected to report quarterly results, with Netflix (NFLX), United Airlines (UAL), Johnson & Johnson (JNJ) and 3M Company (MMM) highlighted.
Deadline: January 17, 5:11:45 pm ET
^GSPC ^DJI Innovations ^IXIC
Trump will be sworn in as president on Monday to begin his second term. U.S. stocks have looked subdued at times over the past few weeks as rising interest rates and debate over whether the Federal Reserve will cut them in 2025 sent the S&P 500 to its lowest level since the election.
But better-than-expected inflation data on Wednesday helped lift U.S. markets, with Bank of America investment strategist Michael Hartnett arguing that S&P 500 stocks will be "protected" from Donald Trump's It will fall further in the coming months as President Donald Trump takes office.
During his first term in the White House, Trump viewed the stock market as a barometer of his administration's success. Many investors expect that he will remain sensitive to corrections in U.S. stocks during his upcoming term.
Ahead of the inauguration, certain "Trump trades" such as small-cap stocks, energy stocks and financial stocks had an on-again, off-again rally. Many believe this is an appetizer for the 2025 stock market theme.
"January ahead of Trump's 1/20 inauguration," Julian Emanuel, head of Evercore ISI's equity, derivatives and quantitative strategy team, wrote in a note to clients Thursday evening. Volatility reinforces the core view of a more volatile year ahead.”
Emanuel expects the S&P 500 to close at 6,800 by 2025, about 13% above current levels, and he still believes the Trump administration will cause investors to trade between "risk-on" and "risk-off" sentiments. Continuously oscillates.
In early January, we noted that the December jobs report beat expectations, sparking some debate about whether the Fed would raise interest rates.
Inflation data for December came in weaker than expected, easing those concerns. Aditya Bhave, senior U.S. economist at BofA Securities, wrote in a Jan. 10 note to clients that the Fed's talk is "turning toward raising interest rates."
Following the release of December inflation data on January 15, Bhave told Yahoo Finance that the report "cuts the tail risk of a rate hike." However, his team still believes the Fed will remain on hold for the foreseeable future.
Read more: What the Fed's rate cuts mean for bank accounts, certificates of deposit, loans and credit cards
With no major economic data expected, markets are likely to take a breather from the Fed discussions in the week ahead. Additionally, the central bank is entering a "blackout period" during which no officials speak publicly ahead of the next policy decision on January 29.
As of Friday afternoon, markets expected the Fed to cut interest rates one or two times this year, according to Bloomberg data.
Last week, the largest banks in the United States released their earnings reports, kicking off the fourth-quarter earnings season. To a large extent, the company's performance was better than expected. FactSet data showed that the S&P 500's profit for the quarter increased by 12.5% year-on-year, compared with the 11.5% expected last week.
"While it's still early days, this is a good start to the reporting period," Citi U.S. equity strategist Scott Chronert wrote in a note to clients on Friday. We expect overall results to be above average and remain optimistic about the earnings outlook."
Earnings season kicks off this week, with 43 S&P 500 companies set to report, led by big tech giant Netflix. But whether earnings truly take center stage will be tested in the coming weeks, as political headlines are expected to swarm as Trump is sworn in.
"We expect policy noise to intensify next week with Monday's inauguration and a series of executive orders reportedly planned," Cronut added. "In the short term, even if the (earnings) report is solid, markets It will also have to deal with increased fiscal, trade and monetary policy uncertainty.”
For now, at least one of the market's headwinds has weakened. The 10-year Treasury yield (^TNX), which has been moving higher over the past week and weighing on stocks, fell nearly 20 basis points to 4.61%.
Whether discussions around Trump's policies will push bond yields higher again will be a key topic to watch in the coming week.
'
on Monday
Markets are closed on Martin Luther King Jr. Day while President Trump is sworn in.
Tuesday:
economic data: No important economic data was released.
income: Netflix (NFLX), 3M Company (MMM), Capital One (COF), Charles Schwab (SCHW), DR Horton (DHI), KeyCorp (KEY), Interactive Brokers Group (IBKR), United Airlines (UAL), Zions Bancorporation
Wednesday
economic data: MBA Mortgage Applications, week ended January 17 (up 33.3% previously); December Leading Index (-0.1% expected, +0.3% previously)
income: Alcoa (AA), Abbott Laboratories (ABT), Ally Financial (ALLY), Comerica (CMA), Discover Financial Services (DFS), GE Vernova (GEV), Johnson & Johnson (JNJ), Halliburton (HAL), Procter & Gamble Gamble (PG), Steel Dynamics (STLD), Travelers (TRV)
economic data: Initial jobless claims for the week ended January 18 (previously 217,000); Kansas City Fed. January manufacturing activity (before -4);
income: American Airlines (AAL), Alaska Airlines (ALK), CSX Corporation (CSX), Freeport-McMoRan (FCX), General Electric Aerospace (GE), Intuitive Surgical (ISRG), Texas Instruments (TXN), Union Pacific (UNP)
economic data: S&P Global U.S. Manufacturing PMI, preliminary data in January (previous value 49.4); S&P Global Services PMI, preliminary data in January (previous value 56.8); S&P Global U.S. Composite PMI in January (previous value 55.4); University of Michigan Consumer Confidence Index, end of January (73.2 previously); Existing Home Sales in December (1.2% expected, 4.8% previous)
income: American Express (AXP), First Citizens BancShares (FCNCA), NextEra Energy (NEE), Verizon (VZ)
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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