Weekly Market Update: February 17, 2025
The nation added an estimated 143,000 jobs in January. That figure fell short of the consensus forecast of 169,000 and was less than half the gain produced in December. Although the headline figure was disappointing, it doesn’t tell the whole story about the state of the labor market. On the positive side, the prior two-month total was revised higher by an estimated 100,000 jobs, and the unemployment rate ticked lower, from 4.1% to 4.0%, last month. This likely puts little pressure on the Federal Reserve to resume cutting interest rates in the near term.
Reducing the pace of consumer price growth has proven difficult in recent months. On point, the January Consumer Price Index (CPI) and the core CPI, which excludes the more-volatile food and energy components, rose 0.5% and 0.4%, respectively, on a month-to-month basis. The increase in the headline figure was the highest rate since June of 2022. On a 12 month basis, the CPI and core CPI increased 3.0% and 3.3%, respectively. The sticky inflation data followed a January employment report that showed an unexpected increase in the average hourly wage. That, combined with a drop in U.S. productivity in the final quarter of 2024, is concerning, as employers often pass along their higher labor costs to consumers through price increases.
Meantime, the profit growth estimate for the final quarter of 2024 continues to rise. With north of 60% of the S&P 500 companies having reported as of press time, more than three-fourths had exceeded expectations. The year-over-year earnings growth rate for the S&P 500 was averaging around 16%, up from 12% at the start of the season. That would mark the fastest pace of increase reported for the Index in four years. This has provided some support for equities, as concerns about monetary and fiscal (i.e., increased trade tariffs) policies build.
Conclusion: With growing uncertainty about the near-term direction of both fiscal and monetary policies, equity market volatility can’t be ruled out. In this environment, a portfolio led by high-quality stocks may prove wise. Also keeping a healthy amount of cash assets on hand gives investors the flexibility to buy on any notable dips.
Source: ValueLine.com
