The futures market suggests a negative open to today’s stock trading. There were no significant data releases scheduled prior to the bell, but investors will get a few economic measures shortly. At 9:45 a.m. EST, Standard & Poor’s will report its flash purchasing managers index readings on the services and manufacturing sectors for the current month. Services growth is expected to have moderated slightly, while the lingering contraction in manufacturing is anticipated to have eased some.
Shortly thereafter, the existing home sales tally for December will be announced. It’s estimated that sales improved to 4.2 million, versus 4.15 million in November. The sector remains stressed. At the same time, the University of Michigan will unveil its final gauge of consumer sentiment for this month. That index is expected to confirm the earlier outcome of 73.2. For the previous month, the level was 74.0. The index is recovering from its 2022 low of 50.0, but remains well off historic peaks of more than 100.0.
Stocks look to close this week solidly in positive territory. In the day following the Dr. Martin Luther King, Jr. holiday and Donald Trump’s inauguration for a second presidential term, the major market indexes steadily advanced. Lending support were gains from General Motors (GM), Charles Schwab (SCHW), 3M (MMM), and Moderna (MRNA), given favorable business momentum and prospects.
More noticeably, on Wednesday, stocks jumped on the news that Softbank (SFTBY), Oracle (ORCL), and OpenAI have a plan, called Stargate, to spend as much as $500 billion on artificial intelligence (AI) advancement, including domestic data center construction. The plan boosted interest in the issues of tech infrastructure developers NVIDIA (NVDA), Microsoft (MSFT), and Arm Holdings (ARM). Some, most visibly Elon Musk, have voiced skepticism that the companies can raise such a hefty amount of money. Still, spending on AI seems sure to rise. Arm gave back some of its gains on Thursday.
Yesterday, overall, equities posted additional improvements, as President Trump made comments, virtually, at the World Economic Forum in Davos on interest rates, tariffs, manufacturing in the U.S., and oil prices. An increase in last week’s jobless claims also likely affected share prices, considering that the latest measure supports the argument for lower short-term interest rates. The Standard & Poor’s 500 (S&P 500) scored its first record closing high for 2025. For all of this week, the S&P 500, Dow, and the NASDAQ appear on track to rise close to 2%.
Next week, in the wake of a strong showing by Netflix (NFLX), earnings reports will come from technology heavyweights Apple (AAPL), Meta Platforms (META), and Microsoft. Wall Street wants to know how much AI is benefiting these titans. Also, at midweek, the Federal Reserve will decide on any changes to the federal-funds rate (now 4.25%-4.50%). None are expected. Too, important inflation data, by way of the personal consumption expenditures price index, will be released on Friday. The Street is hoping for tamer inflation growth.
Year to date, the domestic market indexes, despite volatility, are off to a decent start. With the new U.S. administration, and the uncertainty surrounding its aggressive policy agenda, we would not be surprised to see more swings in share prices, at least through the first half of 2025. Investors would do well to ensure portfolio stability with holdings in high-quality large cap equities. Exposure to mid- and small-cap issues could provide an extra boost, assuming a sustained favorable broader market performance. – David M. Reimer
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
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