Weekly Market Commentary January 6th to January 10th 2025
Factory Orders kicked off the week, which had an abundance of data, declining by 0.4% in November, down from the prior month’s reading of 0.5% and negatively impacted by aircraft orders. However, orders less transportation increased 0.2%, ahead of the estimate and flat from the previous month. Manufacturing, which accounts for about 10% of economic output, continues to struggle since the FOMC started tightening its monetary policy.
The December ISM Services report easily beat estimates to the upside, increasing to 54.1%, and the tenth consecutive monthly expansion. New orders, the backlog of orders and business activity were attributable to the strength.
The Bureau of Labor Statistics released its Job Openings and Labor Turnover Survey (JOLTS) for November totaling 8.1 million, surprising to the upside. There are currently 1.24 job openings for every unemployed person.
Wrapping up the week was the most anticipated economic data from the Bureau of Labor Statistics and came in considerably higher than forecast. Non-farm payrolls increased 256k in December, above the 165k estimate, while the prior two months were revised down by 8k. Lastly, the unemployment rate decreased 0.1% to 4.1%. The report capped a surprisingly strong year and supports the case for a pause in Federal Reserve interest-rate cuts.
The S&P 500 opened the week at 5,942, and closed the week at 5,827, down about 2% for the week and a one-month low. Stronger economic data and job growth has resulted in the likelihood of a slower pace of rate cuts and negatively impacted equity markets.
Rates increased to close out the week after the employment report, with the 2-Year U.S. Treasury increasing by 0.11 percent to 4.38% and the highest level since July of 2024. The 10-Year U.S. Treasury closed at 4.77% up 0.17% percent from the prior week and the highest level since July of 2023. The moves increased the 2/10 spread to 0.41%, the highest level since May of 2022, while the Fed Funds futures probability is showing only one cut in 2025.
Key consumer economic releases next week include the producer (PPI) and consumer (CPI) price indices and Retail Sales.
