Market Outlook: A Crucial Week Ahead
As the first full week of 2025 gets underway, US stocks are struggling to find their footing. The S&P 500 has dropped over 1.5% in the past five trading sessions, while the Nasdaq Composite has fallen nearly 2%. Meanwhile, the Dow Jones Industrial Average is down about 1.5%. But with a critical run of labor market data on the horizon, investors are bracing for a potentially pivotal week.
Labor Market Data Takes Center Stage
This week, the Bureau of Labor Statistics will release its December jobs report, which is expected to show the US labor market added 153,000 jobs in the month, down from the 227,000 seen in November. The unemployment rate is expected to hold steady at 4.2%. Additionally, updates on job openings and private wage growth, as well as readings on activity in the services sectors, will provide a final snapshot of the labor market before the Fed’s next meeting on January 30-31.
Fed Chair Powell’s Optimistic Outlook
In his final press conference of the year, Fed Chair Jerome Powell described the labor market as “good,” noting that the “downside risks” that emerged in the summer of 2024 as the unemployment rate spiked “appear to have diminished.” Powell expressed confidence that the labor market is cooling in a gradual and orderly way, and that further cooling is not needed to get inflation down to 2%.
Corporate News and Earnings
In corporate news, investors will be watching for key announcements from tech companies such as Nvidia during the Consumer Electronics Show. Meanwhile, Delta and Constellation Brands are expected to report quarterly results. The CES tech conference kicks off on Monday with a keynote speech from Nvidia CEO Jensen Huang, followed by an analyst question and answer session on Tuesday.
Market Expectations
As of Friday afternoon, markets were pricing in just an 11% chance the Fed cuts rates at its January meeting. Meanwhile, the historically best seven-day stretch of the year for the S&P 500 came and went without any gains, sparking concerns about the market’s trajectory.
Expert Insights
Bank of America’s Vivek Arya attributed the recent sell-off in Nvidia stock to broader market forces and company-specific issues, including a rotation of money from semiconductors to software. Piper Sandler’s Michael Kantrowitz believes that softer employment data could help rates come down, providing relief to the market.
Economic Calendar
Here’s a look at the key economic data and earnings releases scheduled for the week ahead:
- Monday: S&P Global US manufacturing PMI, Factory Orders, Durable Goods Orders
- Tuesday: Job openings, ISM Services Index
- Wednesday: MBA Mortgage Applications, ADP Private Payrolls, FOMC December meeting minutes
- Thursday: Challenger jobs cuts, Initial jobless claims (markets closed for national day of mourning)
- Friday: Nonfarm payrolls, Unemployment rate, Average hourly earnings, Labor force participation rate
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