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Weekly Market Commentary

Uncertainty about global trade continued to be at the top of investors’ minds as Trump announced 25% tariffs on Mexico and Canada while levying 10% on Chinese goods. Mexico and Canada’s immediate reaction was to place tariffs on US goods. But an about-face mid-morning on Monday saw Mexico’s President Sheinbaum and Canada’s Prime Minister Trudeau turn instead to negotiation, which led to Trump’s tariffs being delayed until March.  China’s response was much more muted but did induce a 15% tariff on US LNG and coal and a 10% tax on US crude oil, agriculture equipment, and automobiles.  China also announced it would put export bans on some rare earth metals and probe both Google and Apple for anti-trust violations.  Trump also announced that levies on European and Japanese goods were in the works and that reciprocal tariffs would be imposed on other countries.  All of this has Wall Street wondering what the ultimate ramifications will be.  Will this be inflationary and inhibit growth, causing stagnation, or is all the rhetoric just noise to bring trade to the negotiating table? Nobody knows, and Wall Street does not particularly like uncertainty.  That said, with all the changes announced by the new Trump administration and its potential disruption, the S&P 500 is just a sneeze away from all-time highs. It feels like there is some complacency in this market, and perhaps we are due for some constructive consolidation.  Volatility will continue to be prevalent.

One hundred thirty-one companies of the S&P 500 announced earnings over the week, and results continued to be mixed but positively skewed. So far, 75% of the companies that have reported beat estimates on earnings per share, and 66% have beat revenue estimates. The aforementioned uncertainty has tempered some guidance, with 8% of the companies that have reported lowering forward guidance.  5% of companies have raised forward guidance.  Google and Amazon shares were hit hard after investors raised questions about the return on investment on Capex spending related to AI.  Google announced that it would spend $75 billion on AI infrastructure.  Palantir and Phillip Morris International had blowout quarters that saw shares rise after their results were announced.   Qualcomm, Pepsi, and Merck had disappointing results.

The S&P 500 fell by 0.2%, the Dow lost 0.5%, the NASDAQ shed 0.5%, and the Russell 2000 was lower by 0.3%.  Market action across the yield curve saw short-tenured paper underperform longer-duration Treasuries. The 2-year yield rose by four basis points to 4.28%, while the 10-year yield declined by eight basis points to 4.49%.  The Bank of England lowered its policy rate by twenty-five basis points with a more dovish posture from the Monetary Policy Committee.

Oil prices continued to slide, losing 2% or $1.51 to close at $70.95 a barrel.  Gold prices extended gains with an increase of 1.8% to close at $2887.10 an Oz.  Copper prices increased by 7.7% to close at $4.60 per Lb.  Bitcoin prices tumbled 6.1% to close the week at $95,846.  The US Dollar index declined by 0.4% to 108.05.

The Employment Situation Report highlighted this week’s economic calendar, which showed 143k Non-Farm Payrolls versus the estimated 155k.  Private Payrolls increased by 111k; the street was looking for 163k.  The Unemployment rate unexpectedly fell to 4% from 4.1%.  Average Hourly Earnings increased by 0.5% versus an estimated 0.3%.  The Average Workweek declined to 34.1 hours from 34.3 hours. The report showed a resilient labor market, but the higher-than-anticipated wage figure stoked the inflation narrative.  Jolts data showed fewer open jobs in the economy at 7.6M versus 8.156M in November.  Initial Claims increased by 11k to 219k, while Continuing Claims increased by 36k to 1.886M.  The ISM Manufacturing print showed expansion for the first time in 26 months, with a reading of 50.9.  However, ISM Services came in at 52.8 from the prior print of 54, showing a deceleration in the services part of the economy.  The first look at the University of Michigan’s Consumer Sentiment index for February was much lower than expected at 67.8. It showed a material uptick in inflation expectations for the year, from 3.3% to 4.3%.
Investment advisory services offered through Foundations Investment Advisors, LLC (“FIA”), an SEC registered investment adviser. FIA’s Darren Leavitt authors this commentary which may include information and statistical data obtained from and/or prepared by third party sources that FIA deems reliable but in no way does FIA guarantee the accuracy or completeness.  All such third party information and statistical data contained herein is subject to change without notice.  Nothing herein constitutes legal, tax or investment advice or any recommendation that any security, portfolio of securities, or investment strategy is suitable for any specific person.  Personal investment advice can only be rendered after the engagement of FIA for services, execution of required documentation, including receipt of required disclosures.  All investments involve risk and past performance is no guarantee of future results. For registration information on FIA, please go to https://adviserinfo.sec.gov/ and search by our firm name or by our CRD #175083. Advisory services are only offered to clients or prospective clients where FIA and its representatives are properly licensed or exempted.

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