The S&P 500 (Index: SPX) touched a new record high during the Martin Luthor King Jr. holiday-shortened trading week.
It hit that high on Thursday, 23 January 2025 as it closed at 6,118.71, before reteating to end the week at 6,101.24. The index was up 1.74% over its previous week's close.
The driving factor behind that change is increasing expectations of a second rate cut later in 2025. The CME Group's FedWatch Tool gives a greater than 75% probability the Fed will act to cut interest rates by a quarter point on 18 June (2025-Q2), but more significantly, it now indicates a greater than 50% probability of another quarter point rate cut on 10 December (2025-Q4).
The latest update of the alternative futures chart the trajectory of the S&P 500 is now consistent with investors focusing their forward-looking attention on that distant future quarter.
Unlike most holiday-shortened weeks, the trading week ending Friday, 24 January 2025 was packed with market-moving headlines.
- Tuesday, 21 January 2025
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- Signs and portents for the U.S. economy:
- Oil falls as Trump's plan to boost US oil output takes shape
- No day-one tariffs from Trump, but he says Canada, Mexico may get duties Feb 1
- Fed minions drops Biden-driven green initiative, are expected by one investment house to deliver more than one rate cut in 2025:
- Central banks' green push hits a hurdle as Fed drops out
- Guggenheim expects Fed to cut rates about every quarter in 2025
- Bigger trouble, stimulus developing in China:
- ‘We’ve impeded China’: departing official defends US export controls
- China's frugal young adults accelerate saving, raising economic risks
- China enters 'new normal' for luxury market with flat sales expected in 2025, report says
- China leaves benchmark lending rates unchanged
- China's crude oil imports from top supplier Russia reach new high in 2024
- BOJ minions gearing up to hike Japan's interest rates:
- ECB minions expected to deliver more interest rate cuts in Eurozone:
- Dow ends up 1%, S&P, Nasdaq rise on liftoff of Trump 2.0 trading era
- Wednesday, 22 January 2025
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- Signs and portents for the U.S. economy:
- BOJ minions see wage inflation in Japan:
- S&P just misses out on record close, Nasdaq ends +1% on Netflix, AI trade boost
- Thursday, 23 January 2025
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- Signs and portents for the U.S. economy:
- Oil falls as Trump urges OPEC to lower prices
- Trump tells Davos he will demand lower interest rates, oil prices
- Trump to global firms: Manufacture in USA or face tariffs
- Fed minions get encouragement for rate cuts from Trump administration
- China's government starts shaking out couch cushions to develop bigger stimulus:
- BOJ minions get better economic news, think they need to start getting ahead of rising inflation in Japan with rate hikes:
- Japan December export growth beats forecast amid tariff jitters
- BOJ likely to raise rates to highest in 17 years, signal more hikes
- ECB minions expected to deliver another interest rate cut for the Eurozone, aren't worried about inflation:
- ECB policymakers line up behind rate cuts
- ECB's Villeroy: Trump policies unlikely to have much impact on euro inflation
- S&P ends at record high, Dow up as Trump pushes for lower oil, rates
- Friday, 24 January 2025
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- Signs and portents for the U.S. economy:
- Oil prices set for weekly drop as Trump touts energy policy, threatens tariffs
- Trump once again calls for OPEC to drop oil prices
- US oil and gas rig count falls to lowest since Dec 2021, Baker Hughes says
- US existing home sales rise in December; house prices hit record high in 2024
- Fed minions expected to hold Federal Funds Rate steady this month:
- Fed to hold rates steady at an unsteady moment
- A Fed on hold, for now, eyes strong jobs, easing inflation
- Growth signs developing in China as stimulus gets results:
- China stimulus scheme lifted 2024 consumption growth by 1 pct point
- POLL China Jan manufacturing activity seen expanding for fourth month
- Dividend surge signals culture shift in China's markets
- BOJ minions raise Japan's base interest rate to 0.5% to combat Japan's rising inflation:
- Bank of Japan raises rates to highest level in 17 years
- Japan hikes rates to highest since 2008 as sustained inflation, rising wages signal ‘virtuous cycle’ in play
- Germany pauses dragging Eurozone economy down:
- Euro zone businesses start year with modest return to growth, PMI shows
- German business activity stabilises in January, PMI shows
- S&P ends below record high; stocks score winning week before Fed's first 2025 meeting
The Atlanta Fed's GDPNow tool's final projection of real GDP growth rate for the now-past quarter of 2024-Q4 is unchanged from the previous week's +3.0% annualized growth estimate. With the BEA's upcoming first estimate of GDP in 2024-Q4 release on 30 January 2024, the GDPNow tool's next forecast will be for real GDP in the first quarter of 2025.
Image credit: Stable Diffusion Dreamstudio Beta. Prompt: "An editorial cartoon of a blindfolded Federal Reserve official who is throwing darts at calendars. One dart is sticking out of the calendar that says 'DEC-2025'."