Market tests inflection point
- Stocks, bonds retreat after robust jobs report
- 10-year Treasury yield hits 14-month high
- This week: inflation (CPI and PPI), retail sales
In a nutshell, 2024’s narrative was “strong US economy, strong stock market.” So far, 2025’s storyline has been “strong economy, soft stock market.”
Stocks got off to a solid start last week, but any doubt the S&P 500 (SPX) wouldn’t end it in the red evaporated after Friday’s stronger-than-expected jobs report appeared to confirm investor suspicions that interest rates were likely to remain higher for longer. The SPX ended the week by testing the short-term support level defined by its late December and early January lows:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation. Note: It is not possible to invest in an index.)
The headline: Stocks extend pullback.
The fine print: The monthly jobs report was well above forecasts, but the markets decided that economic strength made it more likely the Federal Reserve would maintain a hawkish outlook. The Fed was already expected to leave rates unchanged later this month, but the odds of another pause in March jumped from around 60% before the jobs report to above 70% after it.1
The number: 4.77%, the 10-year Treasury yield’s Friday close—its highest since November 1, 2023.
The scorecard: The SPX and Dow fell the least last week:
Source (data): Power E*TRADE. (For illustrative purposes. Not a recommendation.)
Sector returns: The strongest S&P 500 sectors last week were energy (+0.9%), health care (+0.5%), and materials (+0.1%). The weakest sectors were real estate (-4.7%), tech (-3.1%), and financials (-2.7%).
Stock movers: Inari Medical (NARI) +22% to $79.45 and Unifirst (UNF) +21% to $204.69, both on Tuesday. On the downside, Rigetti Computing (RGTI) -45% to $10.04 and Quantum Computing (QUBT) -43% to $9.91, both on Wednesday. RGTI and QUBT were two of several high-flying quantum-computing stocks that tumbled after NVIDIA CEO Jensen Huang’s assertion that “useful quantum computers” were likely 15 to 30 years away.2
Futures: February WTI crude oil (CLG5) tagged a six-month intraday high on Friday following reports of potential US sanctions on Russian and Iran oil,3 ending the week up $2.61 at $76.57. February gold (GCG5) gained $60.30 last week, closing Friday at a four-week high $2,715. Biggest gainers: March natural gas (NGH5) +15.2%, March soybean oil (ZLH5) +14.2%. Biggest decliners: January ether (ETHF5) -10%, January lithium (LTHF5) -7.2%.
Coming this week
This week brings the first inflation and retail sales readings of the year:
●Monday: NY Fed consumer inflation expectations
●Tuesday: NFIB Business Optimism Index, Producer Price Index (PPI)
●Wednesday: Consumer Price Index (CPI), Empire State Manufacturing Index, business inventories, Fed Beige Book
●Thursday: retail sales, import price index, Philly Fed Manufacturing Survey, NAHB Housing Market Index
●Friday: housing starts and building permits, industrial production and capacity utilization
Earnings season gets underway as big banks report their Q4 numbers:
●Monday: Aehr Test Systems (AEHR), KB Home (KBH), Super Micro Computer (SMCI)
●Tuesday: Calavo Growers (CVGW), Karooooo (KARO)
●Wednesday: Blackrock (BLK), Citigroup (C), Goldman Sachs (GS), JPMorgan Chase (JPM), Wells Fargo (WFC)
●Thursday: Bank Of America (BAC), Morgan Stanley (MS), Taiwan Semiconductor (TSM), UnitedHealth (UNH), US Bancorp (USB), J.B. Hunt Transport (JBHT)
●Friday: Fastenal (FAST), Schlumberger (SLB)
Check the Active Trader Commentary each morning for an updated list of earnings announcements, IPOs, economic reports, and other market events.
Slow starts to January
The SPX ended last week below its December 31 close, marking the 28th time in the past 69 years the index has been in the red at this point in the year.
The other 27 times it was in this position, the index lost additional ground the remainder of the month 16 times. By comparison, after the 41 times the SPX had a positive return at this point in the year, it was even higher at the end of January in 29 cases.4
Finally, similar slow starts to January were followed by positive full-year returns 14 times and negative full-year returns 13 times.
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1 CMEGroup.com. FedWatch. 1/10/25.
2 Barron’s. Quantum Computing, D-Wave Quantum, and Rigetti Stocks Plunge. Blame Nvidia’s CEO. 1/8/25.
3 CNBC. Oil jumps on concern over more sanctions on Russia and Iran. 1/10/25.
4 All figures reflect S&P 500 (SPX) daily closing prices, 1957–2024. Supporting document available upon request.