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 crucial run of labor market data on the horizon, investors are bracing for a potentially pivotal week.
Labor Market Data Takes Center Stage
Friday’s December jobs report from the Bureau of Labor Statistics is the week’s most highly anticipated release. Economists expect the report to show the US labor market added 153,000 jobs in December, down from 227,000 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 have diminished. Powell believes the labor market is now looser than pre-pandemic and is cooling further in a gradual and orderly way. Economists expect incoming data to show more gradual cooling, which could alleviate pressure on the Fed to cut rates.
Corporate News: Tech Companies Take the Spotlight
The Consumer Electronics Show kicks off on Monday, with Nvidia CEO Jensen Huang delivering a keynote speech. An analyst question and answer session is also slated for Tuesday. Meanwhile, Delta and Constellation Brands are expected to report quarterly results. Nvidia stock has been under pressure amid concerns over delays of shipments of its new Blackwell chip, but Bank of America’s Vivek Arya believes broader market forces and company-specific issues drove the sell-off.
Santa Claus Rally Fails to Materialize
The historically best seven-day stretch of the year for the S&P 500 came and went without any gains. Since 1950, the S&P 500 has risen 1.3% during this period, but this year it fell about 0.5%. While some analysts believe this could be a sign of a weaker year for stocks, others are more sanguine, noting that last year didn’t feature a Santa Claus rally either, and the S&P 500 still rose roughly 24% in 2025.
Key Catalysts Ahead
One key catalyst could come with next week’s jobs report. A recent rise in the 10-year Treasury yield near 4.6% has contributed to the sour sentiment around stocks, but Piper Sandler’s Michael Kantrowitz believes relief could be on the way. “We think we need to see softer employment to get rates to start coming down,” Kantrowitz said. Whether the soft data comes in the week ahead or later in the first quarter, Kantrowitz believes this narrative shift from the rising rate environment could help “get equities going once again.”
Economic Calendar
Here is a rundown of the key economic data and earnings releases for the week ahead:
- Monday: S&P Global US manufacturing PMI, December final; S&P Global US composite PMI, December final; Factory Orders, November; Durable Goods Orders, November final
- Tuesday: Job openings, November; ISM Services Index, December
- Wednesday: MBA Mortgage Applications, week ended Jan. 3; ADP Private Payrolls, December; FOMC December meeting minutes
- Thursday: Challenger jobs cuts, year-over-year, December; Initial jobless claims, week ending Jan. 4
- Friday: Nonfarm payrolls, December; Unemployment rate, December; Average hourly earnings, month-over-month, December; Average hourly earnings, year-over-year, December; Average weekly hours worked, December; Labor force participation rate, December
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