Key Takeaways
- Stocks Rebound Friday, Ending Losing Streak But Weekly Losses Still Persist.
- Key Economic Data And Fed Minutes To Shape Bond Market Outlook.
- AI Investments Surge As Microsoft Commits $80 Billion To Datacenters
On Friday, stocks ended a five-day losing streak that had closed out 2024 and kicked off 2025. The S&P 500 gained 1.2% on the day but was still down 0.5% for the week. The Nasdaq Composite also fell 0.5% on the week but managed a nearly 2% gain on Friday. Despite a gain of 0.9% Friday, the Dow Jones Industrial Average closed lower by 0.7% for the week. However, the Russell 2000 bucked the trend, adding 1.5% on Friday and 1% for the week.
We never did get a Santa Claus rally to close out last year and the overall weakness with which 2025 began is worth noting. One of my biggest concerns has been and continues to be what we’re seeing in the bond market where the yield on 30-year bonds is now at levels not seen since 2023. This week will have its fill of economic data that could impact where yields are headed. Tomorrow, we’ll get the latest JOLTS report on job openings. Wednesday, the minutes from the most recent Federal Reserve Open Market Committee (FOMC) meeting will be released. Then on Thursday, a 30-year bond auction is scheduled. Finally, on Friday, December employment numbers are due out. Those are just the highlights as we’re also schedule to hear from a number of Fed members throughout the week.
Turning to earnings, as we head into fourth-quarter reporting, overall expectations are for growth of 11.9%, according to FactSet. The number is down from 14.5% back in September. An interesting facet of this is the number of companies who are guiding lower is higher than what we typically see. So far, 106 of the S&P 500 companies have issued guidance with 71 of those companies guiding lower. That is above the five- and ten-year average of 56 and 62, respectively. Sectors where the weakness is most prevalent are IT, Industrials and Consumer Discretionary. With the 12-month forward looking P/E ratio at 21.4, I’ll be interested to see where earnings actually come in. That’s a high P/E and leaves little room for companies to disappoint.
A couple other items of note this week include the rumored resignation of Canadian Prime Minister Jack Trudeau. It will be interesting to see how this ultimately pans out given the incoming Trump Administration and if new Canadian leadership will acquiesce to more favorable trade terms in the threat of increased tariffs. There is also no movement between the International Longshoremen’s Association and management with respect to a new contract. If a new contract isn’t agreed to by January 15th, 45 thousand dock workers could go on strike.
If you worried the Artificial Intelligence (AI) trade was losing steam, you can relax. Microsoft announced over the weekend they will be making an $80 billion investment in AI datacenters. That news, along with strong earnings from Taiwan Semiconductor has chip stocks soaring this morning. Shares of Taiwan Semiconductor are indicated higher by 5% in premarket. Advanced Micro Devices, Broadcom and Nvidia are all also higher in premarket trading. And speaking of Nvidia, CEO Jensen Huang is scheduled to speak later today in Las Vegas at the Consumer Electronics Show (CES).
For today, I’ll be watching to see if stocks can build on Friday’s momentum. In premarket trading, the S&P 500 and Nasdaq 100 futures are both higher by around 1%. I’m also keeping an eye on bond yields. The 30-year rate is up slightly at 4.82%. This will be a busy week with lots of data for markets to parse and then we’ll soon be into earnings season, beginning later this week with Delta Airlines. It’s also going to be a holiday shortened week as markets will be closed on Thursday in remembrance of former President Carter. In other words, this could prove to be a very interesting week for investors. As always, I would stick with your investing plan and long-term objectives.
tastytrade, Inc. commentary for educational purposes only. This content is not, nor is intended to be, trading or investment advice or a recommendation that any investment product or strategy is suitable for any person.
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