Weekly Market Report: February 14th, 2025
Markets looked past more tariff headlines and a couple of discouraging economic reports last week, instead focusing on the ability for tax cuts, deregulation, and an AI boom to lead the way forward. Following a couple of down weeks, the S&P 500 closed up 1.47%, leaving it just below the most recent record high while developed international (+2.9%) and emerging markets (+2.8%) continued to rally, thanks again in part to a weakening USD which closed down 1.2% on the week. Bonds recovered from a mid-week jump in yields to close the week largely unchanged, including the 10yr UST yields which declined 2bps to 4.47%. A 12.6% increase in natural gas and 5.6% jump in copper were the movers across the commodity complex as oil remained relatively flat to close at $70.74.
Market Anecdotes
- We’re now 77% of the way through 4Q earnings reports for the S&P 500 with impressive top and bottom line growth of 16.9% and 5.2% respectively. Beat rates and beat margins of 76% and 7.3% are generally in line with historical averages.
- The bullish camp remains focused on tax cuts, deregulation, a strong consumer, a healthy economy, and the burgeoning AI boom, the latter of which Bespoke’s weekend research note offered an interesting parallel to the internet boom of the 1990’s.
- A hot Inflation report came and went while tariff taxes again grabbed headlines but their categorization as ‘reciprocal’ and slightly more diplomatic ‘negotiable’ tone rather than ‘unilateral’ tone calmed markets.
- The 10yr UST yields have fallen from over 4.8% back toward 4.4% but with the average outstanding mortgage rate at 4% and the current 30yr mortgage rate at 6.8%, borrowers are still faced with some uphill math when looking at buying a home.
- While healthy payrolls and unemployment rate, emerging signs of a slowing labor market warrants careful attention as evidenced by some alternative survey measures.
- Given the notable policy uncertainty, Bespoke noted last week that starting the week after the election, the S&P 500 has remained in a relatively tight trading range of less than 10% which ranks in the 13th lowest percentile of 100-day trading ranges since 1993.
- An amazing technical note on growth stocks is that the NASDAQ 100 has closed above its 200 dma for 485 consecutive days, its second longest such streak on record.
• The Federal budget deficit of -7% is under a microscope and last week saw the initial HOR proposal which outlined extending the 2017 tax cuts accompanied by spending cuts over $1tn. - Treasury auctions last week were mixed with a strong 3yr auction Tuesday followed by a weak (and CPI print impacted) 10yr auction Wednesday.
- Seven Fed speaking engagements and Powell’s testimony to the Senate Banking Committee offered no material updates of note, echoing the FOMC is in no hurry to adjust rates, downside risks to the labor market have faded, and the neutral rate has risen meaningfully.
Economic Release Highlights
- Headline and core CPI for January registered annual readings of 3.0% and 3.3% alongside MoM readings of 0.5% and 0.4%, above consensus expectations across the board.
- Headline and core PPI for January registered annual readings of 3.5% and 3.6% alongside MoM readings of 0.4% and 0.3%, above consensus expectations for all except the core MoM reading..
- Retail Sales in January missed expectations for the headline (-0.9% vs -0.1% and ex-vehicles (-0.4% vs 0.3%) readings while ex-vehicles & gas fell 0.5% following December’s 0.5% gain.
- Industrial Production grew 0.5%, beating the spot consensus forecast of 0.3% and above the high end of the range (0.1% to 0.4%).
- The NFIB Small Business Optimism Index for January registered 102.8, down slightly from December’s 105.1 and below the consensus expectation of 104.7.
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