Market Commentary

For the week ending 2/14/2025

 

Stocks finished mostly higher for the week, with the NASDAQ leading the way, as the threat to technology companies in the U.S. posed by China’s DeepSeek fades from consideration.  The broader S&P 500 and Dow Jones also gained ground, largely in response to President Trump’s decision to not introduce new global tariffs, instead signing an order that, following further study, could lead to the implementation of reciprocal tariffs on a country-by-country basis by April 1.

This dance is becoming all too familiar to global trading partners, as well as U.S. investors.   He threatened 25% across-the-board tariffs on Mexico and Canada only to rescind those tariffs at the last minute, pending further review.  He has imposed tariffs on steel and aluminum, only to state that he is open to negotiating “exemptions” on a case-by-case basis.  The repeated threats, followed by postponements and exemptions seems to be part of President Trump’s negotiating strategy on trade agreements with both allies and rivals in the high-stakes arena of global economic and technological dominance.

As precarious as these stratagems are on a geopolitical basis, Wall Street is buoyed by the fact that a ruinous trade war continues to recede further into the distance.  The Dow, NASDAQ and S&P 500 are all at, or near, their all-time highs.  Corporate earnings are coming in strong, spending and investment are robust, and unemployment remains low.  The promise of Artificial Intelligence bringing efficiencies, innovation and productivity to mainline, consumer-oriented companies is close at hand.

The week’s economic calendar was highlighted by Wednesday’s inflation data, which came in higher than expected. According to the Bureau of Labor Statistics (BLS), the headline consumer price index (CPI) rose 0.5% month over month and 3.0% year over year in January, accelerating from December’s readings of 0.4% and 2.9%.  Core CPI, which excludes volatile food and energy prices, rose 0.4% in January, up from December’s reading of 0.2%.

Thursday brought more inflation data in the form of the BLS’s producer price index (PPI), which similarly rose more than expected, advancing 0.4% in January compared with consensus expectations for a 0.3% increase. However, certain closely watched components of the index showed signs of cooling, which seemed to help ease some concerns following Wednesday’s CPI report.

While testifying in front of the Senate Banking Committee, Federal Reserve Chair Jerome Powell noted that the hotter-than-expected inflation data show that, while Fed policymakers have made significant progress on bringing down inflation, they are “not quite there yet” and they “want to keep policy restrictive for now.” Chicago Fed President Austan Goolsbee echoed Powell’s sentiment in an interview with The New York Times during the week, calling the inflation figures “sobering” and adding “If we get multiple months like this, then the job is clearly not done.” Futures market expectations for the next rate cut moved from September to December following the CPI print.

For the week, the Dow Jones rose 243 points to 44,546 (0.5%), the NASDAQ was up 504 points to 20,027 (2.6%), and the S&P 500 added 89 points to 6,115 (1.5%)

Oil was even at $71.50/bbl.  Gold added another $23 to $2,911/oz.

The yield on the 10 yr. Treasury was unchanged at 4.5%.

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