Equities Post Another Mixed Week Amid Continued Headlines and Earnings

Equities Post Another Mixed Week Amid Continued Headlines and Earnings

Equity markets ended the week mixed as investors continued to digest political and trade-related headlines alongside ongoing earnings releases. Global equities, as measured by the MSCI ACWI, slipped 0.07% for the week, while domestic large-cap stocks, measured by the S&P 500, declined 0.34%. Emerging market equities once again stood out, finishing the week up more than 1.00%.

Earnings Season

Earnings season is underway, with roughly 80% of early S&P 500 reporters exceeding profit expectations so far, broadly in line with the prior reporting period. The pace of releases is set to accelerate in the coming days, highlighted by results from several mega-cap technology companies, including Meta Platforms, Apple, Tesla, and Microsoft.

U.S. Economic Data

On the economic data front, a revised reading from the Bureau of Economic Analysis showed the U.S. economy expanded more quickly than previously reported in the third quarter. Real GDP was revised up to a 4.4% annualized growth rate, slightly above the prior 4.3% estimate and stronger than the second quarter’s 3.8% pace, with the upgrade driven primarily by firmer exports and business investment. The Bureau of Economic Analysis also released its November core personal consumption expenditures price index, the Federal Reserve’s preferred inflation measure, which increased 0.2% month over month, matching October’s pace. On a year-over-year basis, core PCE rose 2.8%, remaining above the Fed’s long-term inflation target of 2%.

Unemployment Claims Below Expectations

The week’s employment data indicated that layoffs remained relatively subdued despite some signs of softening in the labor market. Initial unemployment claims for the week ended January 17 totaled 200,000, slightly above the prior week’s revised 199,000 and below expectations near 207,000, bringing the four-week moving average down to 201,500, the lowest level in two years. Continuing claims declined to 1.849 million for the week ended January 10, down from the prior week’s downwardly revised 1.875 million, reinforcing signs of ongoing labor market resilience.

Consumer Sentiment Index

The University of Michigan released the final January reading of its Consumer Sentiment Index, which rose to 56.4 from 52.9 in December. Despite the month-over-month improvement, sentiment remained more than 20% lower than a year ago, as consumers continued to cite pressure on purchasing power from elevated prices and concerns about a softening labor market.

Looking Ahead

Important economic data for the week ahead includes a policy meeting and interest-rate decision from the Federal Reserve on Wednesday, with rate futures markets implying a 97% probability that rates remain unchanged, according to CME FedWatch, followed by the release of producer price index inflation data from the Bureau of Labor Statistics on Friday.

As Always

I’d like to leave you with the final line we’ve used since we started these commentaries back at the very height of market volatility in March 2020. Always remember that we create financial/investment plans not for the easy times, but to prepare for the tough ones.