Stocks Fall on Policy Jitters as Earnings Season Begins; Bonds Mixed
Good morning,
The Dow (-0.3%), NASDAQ (-0.7%), and S&P 500 (-0.4%) each fell fractionally for the week. Meanwhile, taxable bonds lost 0.1% and tax-free municipal bonds gained 0.2%. The 10-year Treasury yield gained 0.06% to finish the week at 4.23%
In top economic news last week, inflation data for December was released, and was the first “real” reading since before the government shutdown in October. The most popular Consumer Price Index (CPI) values for December remained at 2.7%, the same as November. However, that was slightly below economist’s expectations of 2.8%. The remainder of the economic data was from November and is still catching up from the government shutdown. The Producer Price Index (PPI) from November showed that wholesale prices rose 0.2% over the prior month, in line with expectations. However, the headline and core PPI values were both at or above 3% over the prior year, exceeding economists’ expectations. It should be noted because the PPI data was from November, it may not be relied on as heavily, but it still shows that inflation remains sticky. With a larger-than-normal tax refund season looming, investors will be watching to see if that extra money in the economy could cause inflationary pressure, but that won’t be seen for a few more months. Regardless, the inflation data was in line enough that most investors expect that the Fed will NOT raise or cut interest rates at its next meeting later this month. Retail sales for November also exceeded expectations, proving that the US consumer continues to spend.
The markets are now dealing with uncertainties regarding Trump administration policies. The Supreme Court is expected to announce their ruling on the legality of the tariffs imposed by President Trump. Additionally, Trump has been announcing his eagerness to buy or take control of Greenland for a variety of national security reasons. This has met opposition from European leaders, and the President is responding with the potential of more tariffs. This isn’t sitting well with the markets, as they are looking to open this week sharply down. We are also entering corporate earnings season, and the big banks announced strong earnings last week, but the markets weren’t that enthusiastic about it. Let’s see how the rest of the corporate earnings turn out.
Have a great day and terrific week! Please recall that we have three video / podcasts being released that provide an economic summary of 2025 and an outlook for 2026. Part 2 will air tomorrow, January 21.
Source: Yahoo Finance
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