Weekly Market Report: January 17th, 2025
Market Anecdotes
- Economic data last week generally served to cool the ‘no landing’ scenario with data reflecting moderating core services inflation, reinforcing notions of a cooling labor market and taking Fed policy expectations back toward where they were prior to last week’s jobs report.
- The rise in interest rates since mid-September is a key market dynamic at this time and last week provided some much needed respite from the more recent leg higher since December 6th.
- Corporate earnings kicked off last week with Q424 expectations at 7.3% alongside downwardly revised but still robust 2025 quarterly growth of Q1 11.2%, Q2 9.4%, and Q3 12.7%.
- An illustration from The Daily Shot painted a helpful illustration of U.S. equity category valuations reinforcing expensive headline and momentum indices countered by cheap small caps.
- An additional valuation note last week by Alpine Macro highlighted the U.S. equity risk premium currently near a 23 year low which speaks to the relative attractiveness of the S&P 500 to U.S. Treasury bonds.
- Forces underpinning the strong USD include relative global growth dynamics, a less aggressive Fed easing cycle, rising USD market-based bond yields, geopolitical risks, and overall bullish sentiment surrounding the USD.
- BCA noted the increase in UofM survey data on consumer inflation expectations was not reinforced by the NY Fed consumer survey on inflation where forward expectations were much more muted.
Economic Release Highlights
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December YoY headline (2.9% vs 2.9%) and core (3.2% vs 3.3%) CPI alongside MoM readings of headline (0.4% vs 0.3%) and core (0.2% vs 0.3%).
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PPI in December came in slightly softer than forecast with headline and core MoM readings of 0.2% and 0% respectively. YoY readings of 3.3% and 3.5% were in line with expectations.
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Headline Retail Sales for December were slightly weaker than expected (0.4% vs 0.6%)
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NFIB Small Business Optimism Index improved to 105.1, a notable move higher from November’s 101.7 reading and above the spot consensus.
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The January NAHB Housing Market Index came in higher than expected (47 vs 45) and improved from December’s level.
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December Housing Starts (+16% MoM) and Permits (-1% MoM) both beat expectations, offering a slightly more upbeat tone to housing market dynamics.
