Volatility Causes Stock Markets To End Slightly Lower; Bonds Mixed
Good morning, and Happy Winter Wonderland (Yuck!!). We hope that everyone makes it through this winter event safely.
The Dow (-0.5%), NASDAQ (-0.1%), and S&P 500 (-0.3%) each finished the week down fractionally. Meanwhile, taxable bonds were up about 0.1% and tax-free municipal bonds fell about 0.3%. The 10-year Treasury yield remained unchanged at 4.23%.
Nearly all of the market actions last week were centered around President Trump’s attempts to acquire Greenland as a US territory during the World Economic Forum in Davos, Switzerland. The markets started the week sharply lower as the President threatened to substantially increase tariffs to European nations that resisted his attempts. However, when he backed off those threats and developed the framework for a deal to “acquire” Greenland (the details of the deal have not been announced), markets recovered most of their losses. Of course, the methods that President Trump used to accomplish his goals can be quite divisive and cause our allies to be upset with the US, the end result is that he essentially got what he wanted. Greenland represents a strategic location in the globe to help protect the US and Europe from potential Russian or Chinese aggression, and also serves as a hot spot for rare earth minerals essential to many economic initiatives. Apparently, the US has wanted to take control of Greenland for close to a century, and this may have finally paved the way. It’s just that the methods to get here are certainly debatable. However, one fallout is that the US dollar lost value, which helped propel international stocks.
In economic news, data continues to pour in that is “stale” because of the government shutdown that began in October. The Fed-favored inflation reading, Personal Consumption Expenditures (PCE), was reported as a 2.8% annual increase for November, and matched economists’ expectations. As for real-time data, weekly jobless claims were reported and shows that new unemployment claims continue to remain low. The combination of this data provides no impetus for the Fed to raise or lower rates at its meeting on Wednesday. Thus, a move by the Fed to change interest rates will likely cause a lot of market movement.
This week marks the largest week of quarterly corporate earnings reports, including four big tech companies (Microsoft, Meta, Tesla, and Apple) reporting their earnings Wednesday and Thursday. Barring any major geopolitical events, or the Fed changing course with its interest rate decision on Wednesday, it is widely expected that these earnings reports will have the largest impact on the markets this coming week. Investors’ attention will likely be centered on AI spending, as these are four of the seven companies at the core of AI. Lastly, investors continue to wait for the Supreme Court’s decision on the legality of the tariffs, and that decision could come any day. If found illegal, it will likely cause a swift market move, but the direction is also debatable, too. Let’s just get it over with so we can focus our attention on economic data again!
Have a great day and terrific week.
Source: Yahoo Finance
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The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. Government bonds and Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.
