Weekly Market Commentary February 17th to February 21st 2025
It was a fairly light week this week lead by the real estate sector and more “stay the course” news from the Fed. Market volatility was up sharply with tariff talk out of Washington distracting investors.
Winter can be cruel to the real estate sector and homebuilders where hit by the double-edge sword of both bad weather and wildfires. Housing Starts for January came in lower by 9.8%, Building Permits were flat for the month, and Existing Home Sales were down 4.9%. Continued elevated mortgage rates are also a key contributor to poor housing performance, with 30-year mortgages averaging around 7% for the month.
Elsewhere in the holiday-shortened week, the S&P Purchasing Managers’ Indices (PMI) came in with an upside and downside surprise. Manufacturing was stronger than expected, but the bigger news was Services dipping into contractionary territory for the first time in over two years. Blame was placed squarely on the uncertainty around spending cuts and potential pro-inflationary policies of the new administration. The final bit of data released this week was Weekly Initial Jobless Claims, a key statistic measuring job cuts. It has been hovering in the low-200k range, and this week was no different, coming in at 219k.
The minutes of the FOMC’s January meeting were released on Wednesday and the story told was similar to the post meeting press-conference. The notes re-affirmed the Fed’s intention to hold rates steady until there is further improvement in inflation. Last week’s about-face in the CPI and PPI will likely continue to push any rate reductions further down the road.
Despite hitting all-time highs mid-week, the equity markets closed down for the week on consumer and investor uncertainty. The S&P 500 finished at 6013 or -1.7%; the Dow Jones Industrials lost 2.5%; and the Nasdaq was off by the same amount to close at 19,524. In fixed income, there was a slight rally in U.S. Treasury yields with the 2-Year closing at 4.20%, the 10-Year at 4.43%, and the 30-Year at 4.68%.
Next week, look for PCE inflation data, Personal Income and Spending, New and Existing Home Sales, and revised Q4 GDP. There will also be several Fed governors speaking to provide more insight into the Fed’s Committee’s thinking.
