Weekly Market Outlook
By Keith Schneider
MarketGauge Pro
January 22, 2025
The U.S stock market experienced a robust performance in the week ending January 17, 2025, marking its best week since President Trump’s election victory. The S&P 500 rose by 2.9%, Poppa Dow Jones Industrial Average gained 3.7% and the Nasdaq Composite increased by 2.5% over the past 5 trading days. The Russell 2000 Index, representing small-cap stocks, experienced a notable rise of 4% over the past 5 days, closing at 2,275.88. The Nasdaq 100 continues to dominate, although momentum is still weak.
This positive price action was largely driven by strong earnings reports from major banks. JPMorgan Chase, Goldman Sachs, and Citigroup reported substantial profit growth, propelling their stock prices to new highs, however momentum is still weak. The financial sector (XLF) is up about 4% YTD.
In addition to corporate earnings, economic indicators contributed to market optimism. The Consumer Price index (CPI) data for December showed a slight moderation in core inflation, which eased to 3.2% from 3.3% in November. This development fueled hopes that the Federal Reserve might continue lowering Interest Rates. Consequently, U.S Treasury yields retreated from their recent highs, with the 10-year Treasury note yield decreasing to around 4.61% at Friday’s close, down from 4.77% the previous week.
In the technology sector, companies like Amazon and Broadcom signaled new buying opportunities, contributing to the overall market gains. Additionally, Bitcoin surged close to record highs, anticipating pro-crypto policies from the incoming administration. At of time of this writing Bitcoin is trading around 104,000 poised to take out its all-time highs. We view this action in Bitcoin as a risk on indicator.
Looking ahead, investors are encouraged to gradually increase exposure while remaining vigilant to potential market retreats. The upcoming week will likely show reactions to President Trump’s policy moves, with earnings season ramping up.
Semiconductors… (a key risk on indicator) moved back into a bullish phase which is positive with improved momentum.
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However, the retail sector was down on the week and the majority of the modern family members are in warning phases with weak momentum as indicated by our real motion indicator.
All this being said It is interesting to see that Energy and Soft Commodities are in bullish phases. As we zoom out YTD and look at the leading sectors of the market in terms of performance, leading the charge is the most hated sectors in 2024 which include Energy (+7.71) and Basic Materials (+5.24).
To sum up…the recent action in banks looks optimistic for the short-term trend in the market but ultimately, we need to see further positive market action to confirm this trend. Additionally, we need to see easing commodity prices which would allow the Fed to continue easing.
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- Keith’s weekly market analysis video
