The S&P 500 (Index: SPX) had its best trading week since the 2024 elections. The index closed up 2.9% to end the week at 5,996.66.
The index had its best day on Wednesday, 15 January 2025 thanks to a better-than-expected consumer price inflation report. Although headline inflation ran hot, thanks largely to food prices, which are showing the effects of a reduced supply of eggs because of bird flu. Less volatile components of the Consumer Price Index were muted however, which firmed the odds for at least one rate cut during 2025 and raised the potential for additional rate cuts.
After the tamer than expected inflation data, the CME Group's FedWatch Tool gives much stronger odds of the Fed acting to cut interest rates by a quarter point on 18 June (2025-Q2). Meanwhile, the probability of another rate cut later in the year also rose, but as yet remain below 50%, with December 2025 coming the closest to that threshold.
That's a significant development because the latest update of the alternative future chart shows investors shifting their forward-looking attention toward the distant future quarter of 2025-Q4.
Here's the full rundown of the trading week's market moving headlines:
- Monday, 13 January 2025
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- Signs and portents for the U.S. economy:
- Oil prices climb 2% to 4-month high with sanctions expected to disrupt Russian supplies
- US bank profits likely boosted by higher deal fees, trading
- LA blaze damage likely to be largest wildfire insured loss in US history
- Bigger bailouts, mixed economic signs developing in China:
- China flags more policy measures to bolster yuan
- China exports accelerate amid trade tensions, imports surprise
- China vehicle export growth to slow in 2025, association data shows
- Bigger trouble developing in the Eurozone, ECB minions worry about keeping Eurozone interest rates too high:
- German premium carmakers' sales battered in China and Germany amid slowdown
- ECB’s chief economist warns of too-low inflation if rates stay high
- Dow, S&P, Nasdaq ended trading mixed ahead of inflation and earnings figures
- Tuesday, 14 January 2025
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- Signs and portents for the U.S. economy:
- US small business confidence jumps to more than six-year high
- Oil prices slip on US energy demand forecast
- EIA expects oil prices to be under pressure from oversupply in 2025, 2026
- Oil shipping rates surge after US sanctions hit availability
- US inflation still slowing as producer prices rise below expectations in December
- BOJ minions thinking about maybe hiking rates, mixed economic signs developing in Japan:
- BOJ deputy governor flags chance of rate hike next week
- Japan's service mood improves, rising costs cloud outlook
- Japanese investors exit foreign assets for third straight month in Dec
- ECB minions thinking they can't lower Eurozone interest rates faster:
- S&P, Nasdaq, Dow finish mixed after cooler producer inflation data
- Wednesday, 15 January 2025
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- Signs and portents for the U.S. economy:
- US consumer prices post largest gain in nine months; underlying inflation slowing
- Cooler core inflation revives bets on Fed rate cuts
- Instant view: Dec CPI rises a touch above expectations, keeps Fed on track
- US 30-year mortgage rate tops 7%, highest since May 2024
- US importers rush in goods from China as Trump tariff threat looms
- Oil gains capped by uncertainty over sanctions impact
- Fed minions say they're uncertain on direction of economy, but claim they're beating inflation:
- Fed's Williams says policy data dependent in very uncertain environment
- Fed's Barkin says latest CPI data shows price pressures continue to ease
- BOJ minions say they could hike rates as soon as next week, long-running problem for Japan's economy to get worse:
- BOJ chief Ueda signals rate hike chance next week, yen jumps
- Japan firms face serious labour crunch from aging population, survey shows
- Bigger trouble developing in Eurozone, ECB minions thinking about more rate cuts:
- German economy shrinks for second consecutive year
- ECB to cut rates four more times by mid-year, say economists - Reuters poll
- Nasdaq ends with 2% rally, yields slump as core CPI inflation cools
- Thursday, 16 January 2025
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- Signs and portents for the U.S. economy:
- Oil settles lower on expected halt to Houthi shipping attacks
- Inflation revival persists as market risk despite CPI-fueled rally
- Fed minions say they're thinking about more rate cuts:
- Fed may cut rates sooner and faster than expected if disinflation holds up, Waller says
- Fed's Goolsbee says he feels more comfortable that labor market is stabilizing, WSJ reports
- BOJ minions expected to hike Japan interest rates no later than March 2025:
- ECB minions thinking about multiple rate cuts for the Eurozone:
- Nasdaq, S&P, Dow end lower after rally ignited by rate-cut optimism
- Friday, 17 January 2025
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- Signs and portents for the U.S. economy:
- Oil set for fourth week of gains as investors assess US sanctions impact
- US drillers cut oil and gas rigs to lowest since Dec 2021, Baker Hughes says
- Global diesel prices spike as US hits Russia with new sanctions
- US single-family housing starts, permits hit 10-month high in December
- US manufacturing output accelerates in December
- US mid-sized banks ride industry upswing on robust fee income
- Fed minions admit they're failing to restrain Bidenflation:
- Bigger trouble, stimulus developing in China:
- China's economy meets official growth target, but many feel worse off
- China kicks off subsidised auto trade-ins
- China's vast refining sector faces shakeout as fuel demand peaks
- ECB minions getting excited to cut Eurozone interest rates more:
- Bulls bellow as Wall Street surges to best week since November election
The Atlanta Fed's GDPNow tool's projection of real GDP growth rate for the now-past quarter of 2024-Q4 rose to +3.0% from the previous week's +2.7% annualized growth estimate. The BEA's first estimate of GDP in 2024-Q4 will be released on 30 January 2024, when the GDPNow tool will shift to start nowcasting GDP for the current quarter of 2025-Q1.
Image credit: Microsoft Copilot Designer. Prompt: "An editorial cartoon of a Wall Street bull taking a box that says '2025 RATE CUTS' from a bear."
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