The S&P 500 (Index: SPX) was very little changed from the previous week's close in the first week of February 2025. The index ended the trading week less than a quarter percentage point at 6,025.99 on Friday, 7 February 2025.
The biggest market-moving news came on that day, as a better-than-expected jobs report altered the expectation of Wall Street bulls that there will be at least two rate cuts in 2025.
Following the release of the January 2025 jobs report, the CME Group's FedWatch Tool moved the expected timing of the Fed's next change Federal Funds Rate to 30 July (2025-Q3), when a quarter point reduction is anticipated. More significantly, the tool now anticipates that will be the only rate cut during 2025.
The latest update of the alternative futures chart shows the effect of this change in expectations was to shift the forward-looking focus of investors from 2025-Q4 inward toward the nearer term investment horizon of 2025-Q2. We think investors are focusing on this quarter for its potential to see an earlier rate cut.
Here's a recap of the week's market-moving headlines, in which political noise involving tariffs was outweighed for effect by the change in expectations for the timing and number of interest rate cuts in 2025:
- Monday, 3 February 2025
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- Signs and portents for the U.S. economy:
- Trump imposes 25% on Canadian, Mexican imports, 10% on Chinese goods
- Oil prices gain as Trump tariffs stoke supply worries
- US manufacturing rebounds in January, inputs prices paid measure surges
- US banks say demand for business loans rose in Q4 -Fed survey
- Fed can be patient on rates while assessing impact of tariffs, Collins says
- Bigger trouble, possible US trade deal developing in China:
- China home prices, sales slip further in January, report shows
- China factory activity growth slows in January, Caixin PMI shows
- Trump warns tariffs on China may increase
- Bigger trouble developing in Japan, BOJ minions thinking about more rate hikes:
- Japan's factory activity extends decline, optimism weakens, PMI shows
- BOJ debated weak-yen risk, scope for more rate hikes at Jan meeting, summary shows
- Germany pulling Eurozone economy down more slowly:
- ECB minions get undesirable inflation news, but still thinking about more Eurozone interest rate cuts:
- Wall Street cuts losses after Trump delays tariffs on Mexico for a month
- Tuesday, 4 February 2025
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- Signs and portents for the U.S. economy:
- Bigger trouble, stimulus developing in China:
- BOJ minions claim they have a target for Japan's inflation:
- Nasdaq ends up 1%, S&P, Dow rise as focus shifts to earnings from tariff tussle
- Wednesday, 5 February 2025
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- Signs and portents for the U.S. economy:
- Oil drops amid rising US crude inventories, Sino-US tariff war
- US Postal Service suspends inbound parcels from China, Hong Kong
- Record high imports pressure US trade deficit
- Fed minions say they're going to cut rates, slowly:
- Fed's Jefferson: Rates likely to fall over medium term
- Fed's Jefferson: In no rush to reduce level of policy restraint
- Bigger trouble, stimulus developing in China:
- Chinese firms control around 75% of Indonesian nickel capacity, report finds
- China's services activity grows at slower pace, Caixin PMI shows
- BOJ minions getting the higher inflation they've wanted for decades:
- Japan's service activity grows thanks to Asian demand, PMI shows
- Japan inflation-adjusted wages rise in December on jump in bonuses
- ECB minions thinking about getting into digital currency game:
- Nasdaq pulls out a win as Alphabet stems loss; S&P, Dow gain with Nvidia advance
- Thursday, 6 February 2025
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- Signs and portents for the U.S. economy:
- Oil settles down after Trump repeats pledge to boost US supply
- US banks raise equity to jumpstart deals, bolster balance sheets
- Fed minions want to see worse job market to justify more rate cuts:
- Dallas Fed's Logan signals rate cuts require US labor market cooling
- Goolsbee: Fed in solid place for eventual cuts though uncertainty means a slower approach
- Bigger trouble, stimulus developing in China:
- Other central banks more aggressive with rate cuts:
- BOJ minions worry about higher inflation, thinking about more rate hikes to combat it:
- BOJ's fresh take on labour crunch opens door for more rate hikes
- Hawkish BOJ policymaker urges raising rates to at least 1%
- S&P ends higher, Dow declines as Wall Street wades through earnings ahead of January jobs report
- Friday, 7 February 2025
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- Signs and portents for the U.S. economy:
- Oil set for third straight weekly decline amid tariff concerns
- Trump pauses de minimis repeal as packages pile up at US customs
- US job growth slows in January; unemployment rate at 4.0%
- Fed minions say all's well with economy, no need to rush rate cuts:
- Fed officials see healthy jobs market, no rate-cut rush
- Fed Monetary Policy Report flags solid economy, elevated markets
- Bigger stimulus developing in China:
- ECB minions get academic support for more Eurozone rate cuts:
- Nasdaq, Dow, S&P end down 1% as inflation, trade war worries overshadow mixed jobs report
The Atlanta Fed's GDPNow tool's projection of what real GDP growth will be in the 2025-Q1 held steady at +2.9%, the same as last week's forecast.
Image credit: Microsoft Copilot Designer. Prompt: "An editorial cartoon featuring a Wall Street bull who's shocked that a good jobs report means fewer rate cuts". We modified the to add the headline and to remove an excessive number of fingers. Unlike last week's editorial cartoon, which we left completely alone despite all its glorious AI-generated weirdness because it fit so well with our discussion!...