I hope everyone enjoyed the long weekend! With us having Monday off, this week's update is arriving a day later, but there's plenty to catch up on. From softer inflation reports to strong bank earnings, last week's market activity brought a mix of optimism and opportunities. Let's dive in!
Inflation Reports Bring Relief
The big headline last week was the softer-than-expected inflation data. Here are the highlights:
- Core Consumer Price Index (CPI): Up 3.2% year-over-year in December, slightly below expectations. This was a welcome sign for markets concerned about rising prices.
- Producer Price Index (PPI): Core PPI growth came in at 0.0% for December, down from an expected 0.3% increase. Year-over-year, core PPI rose 3.5%.
These reports helped ease inflation fears and supported rallies in both the stock and bond markets.
Markets Respond Positively
The combination of lighter inflation data and strong earnings fueled gains across financial markets:
- Equities: Major indices saw a rally, with standout performances from the "Magnificent Seven" tech companies (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla). Energy, financials, and materials sectors also gained more than 6%.
- Fixed Income: Treasury yields dropped after the inflation reports, with 10-year yields falling to 4.61%.
Even as rates declined, value stocks outperformed growth equities, thanks in part to robust bank earnings and a weakening dollar.
Highlights from Bank Earnings
Many major banks, including JPMorgan, Wells Fargo, and Goldman Sachs, reported strong earnings last week. Several raised their guidance for 2025, contributing to optimism in the financial sector.
What's Ahead This Week
It's a lighter week for economic data, but here's what to watch:
- U.S. Leading Economic Index (Wednesday, January 22): Expected to rise 0.1%, down from 0.3% last month.
- Initial Jobless Claims (Thursday, January 23): Labor market data remains steady, with claims averaging around 210,000 recently.
- Existing Home Sales and PMI Data (Friday, January 24): Existing home sales are anticipated to tick up slightly to 4.2 million, while PMI reports will provide insights into January's economic activity.
Final Thoughts
As we settle into the week, it's worth noting the positive momentum from last week's market performance. While this week's data may be lighter, employment and housing trends will still offer valuable clues about the economy's direction.
Tom Hine is a CERTIFIED FINANCIAL PLANNER® professional and owner of Capital Wealth Management. He works with individuals and families on financial planning, retirement strategies, and investment management. With offices in Glastonbury and Wilton, CT, Tom serves clients across Connecticut and throughout the U.S. Connect with Tom
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