Weekly Market Commentary January 13th 2025 to January 17th 2025

This week was all about inflation. The Fed has telegraphed that they may go into a bit of a holding pattern regarding interest rates due to the stubborn last 1% of attaining their 2% inflation goal. There were some dire predictions for December’s producer and consumer inflation measures, but in the end, things weren’t as bleak as anticipated. The PPI (producer prices) came in at 3.3% year-over-year when 3.5% was expected. This is still up markedly over November’s 3.0%. When stripping out food and energy, we got a 3.4% reading which matched November’s and beat expectations by 40 basis points. On the consumer side, the CPI matched expectations of 2.9% but was still up 20 basis points over November’s. Ex-food and energy, the “core” CPI beat both the prior month’s and consensus and came in at 3.2%. Although not exactly back on track, optimism ruled the week with hopes that this may be the beginning of a new downward trend.

The other big news of the week that seemed to land with a whimper was December’s Retail Sales. This was the big holiday shopping month and the headline number came in at a disappointing +0.4% when +0.6% was expected. Markets shrugged off the news and stayed positive, basking in the glow of the inflation wins.

Elsewhere in the economy, December Housing Starts were up 15.8% over November in this volatile sector. Winter weather can play havoc on real estate measures and this is a prime example. Building Permits for December were down slightly from the previous month. Lastly, came a big win for Industrial Production when December’s print came in at +0.9% when +0.3% was expected. Looking deeper into the number we see a partial rebound in aircraft production as a likely culprit. Overall, manufacturing has been lackluster for the past 12 months due to high rates and uncertainty.

The markets reflected the generally positive data this week and both stocks and bonds finished the week on a high note. The S&P 500 closed at 5,997 (+2.92% for the week); the Dow Jones Industrials at 43,488 (+3.70%); and the NASDAQ finished at 19,630 (+2.44%). In fixed income, 2’s, 10’s, and 30-Year US Treasuries rallied and yields were down across the board. The 10-year closed at 4.61%.

The upcoming holiday-shortened week will provide us with very little economic data with only December Existing Homes Sales on the docket. Important items coming in the next couple of weeks include first cut of fourth quarter GDP, Personal Consumption Expenditures, and President Trump’s first days in office initiatives.