S&P 500 (^GSPC) just posted its best week since the November election as cooler-than-expected inflation data eased concerns that the Federal Reserve may rule out cutting interest rates for all of 2025.
For the week, the S&P 500 jumped more than 3%, while the tech-heavy Nasdaq Composite (^IXIC) increased by more than 2.6%. Dow Jones Industrial Average (^DJI) led gains and soared nearly 4%.
The light economic calendar is set to greet investors with updates on activity in the services and manufacturing sectors, as well as updates on consumer sentiment due for release.
In corporate news, 43 S&P 500 companies are expected to report quarterly results highlighted by Netflix (NFLX), United Airlines (UAL), Johnson & Johnson (JNJ) and 3M (MMM).
SNP – Delayed offer•USD
Ends: January 17th at 5:11:45 PM EST
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Trump is expected to take the presidential oath for the second time on Monday. US stocks have looked sluggish over the past few weeks as rates have risen and more debate over whether the Federal Reserve will cut interest rates in 2025 sent the S&P 500 to its lowest levels since the election.
But a Wednesday's inflation was better than expected have helped U.S. markets rally, and Bank of America investment strategist Michael Hartnett believes stocks in the S&P 500 will be “protected” from further declines under President-elect Donald Trump in the coming months.
During his first term as president, Trump viewed the stock market as barometer for him the success of the administration. Many investors expect Trump to remain sensitive to a decline in U.S. stocks during his upcoming turnaround.
Rally across certain “Trump trades” such as small caps, energy stocks and financials he had fits and starts leading up to the inauguration. That was an early appetizer for what many believe will be the theme of the stock market in 2025.
“Lean volatility ahead of Trump's 1/20 inauguration reinforces the fundamental view of a more volatile year ahead,” Julian Emanuel, who heads the equities, derivatives and quantitative strategy team at Evercore ISI, wrote in a note to clients Thursday evening.
Emanuel, who sees the S&P 500 ending at 6,800 in 2025, up about 13% from current levels, still says the Trump administration will bring continued swings among investors between “risk on” and “remove risk”.
A cutout of President-elect Donald Trump is seen as traders work on the floor of the New York Stock Exchange (NYSE) on January 2, 2025 in New York. (TIMOTHY A. CLARY/AFP via Getty Images) ·TIMOTHY A. CLARY via Getty Images
Cooler-than-expected December inflation eased those concerns. Bank of America Securities chief economist Aditya Bhave wrote in a Jan. 10 note to clients that the Fed's talk was “heading for hikes.”
After December inflation data was released on January 15, Bhave he told Yahoo Finance message “limits the risks of the hike.” But his team still believes the Fed will stay put for the foreseeable future.
Markets are likely to take a break from the Fed's discussion next week as no major economic data releases are expected and the central bank enters a “blackout period” during which no officials speak publicly ahead of its next policy decision on January 29.
As of Friday afternoon, markets were pricing in a range of one to two Fed rate cuts this year, according to Bloomberg data.
Fourth quarter earnings season began in earnest last week with news from the nation's biggest banks. Predominantly, the company's results were better than expected. FactSet data shows the S&P 500 is now on track for 12.5% year-over-year earnings growth this quarter, compared with the 11.5% expected last week.
“While it's early, it's a great start to the reporting period where we expect higher-than-average comprehensive income and remain bullish on the earnings outlook,” Citi U.S. equity strategist Scott Chronert wrote in a note to clients on Friday.
Earnings season continues this week with 43 S&P 500 companies reporting, led by big tech giant Netflix. But whether or not it will actually focus on earnings will be tested in the coming weeks as political headlines are expected to pile up as Trump takes the oath of office on Monday.
“We expect the noise in politics to intensify next week with Monday's inauguration and a reported flurry of executive orders,” Chronert added. “In the short term, markets will have to deal with building uncertainty around fiscal, trade and monetary policy, even if [earnings] the news is solid.”
Whether or not the conversation around Trump's policies sends bond yields higher again will be a key story to watch in the coming week.
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Monday
Markets were closed for Martin Luther King Jr. Day while President Trump takes the oath of office.
Tuesday:
Economic data: No significant economic data has been published.
Profit: Netflix (NFLX), 3M Company (MMM), Capital One (COF), Charles Schwab (SW), DR Horton (DHI), KeyCorp (KEY), Interactive Brokers Group (IBKR), United Airlines (UAL), Zions Bancorporation (ZION)
Wednesday
Economic data: MBA mortgage applications, week ending Jan. 17 (previously +33.3%); Leading index, December (-0.1% expected, +0.3% earlier)
Economic data: Initial jobless claims, week ending Jan. 18 (previously 217,000); Kansas City Fed. Manufacturing activity, January (before -4);
Profit: American Airlines (AAL), Alaska Airlines (ALK), CSX Corporation (CSX), Freeport-McMoRan (FCX), GE Aerospace (GE), intuitive surgery (ISRG), Texas Instruments (TXN), Union Pacific Corporation (UNP)
Economic data: S&P Global US manufacturing PMI, January preliminary (prev 49.4); S&P Global Services PMI, preliminary January (56.8 previous); S&P Global US composite PMI, January (prev 55.4); University of Michigan Consumer Sentiment, January final (73.2 ago); Existing home sales, December (1.2% expected, previously 4.8%)
Profit: 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.
