The futures market suggests a mixed open to today’s stock trading. This morning, investors will get to parse new economic data. Standard & Poor’s is scheduled to release its “flash” Purchasing Managers Index numbers on domestic manufacturing and services for the month of February. Expectations are that both sectors continued to expand, albeit at relatively modest rates.
Shortly after this release, the University of Michigan will provide its final assessment of consumer sentiment for the current month. It’s expected to be unchanged from the unprepossessing level of 67.8 reported earlier. At the same time, the National Association of Realtors will announce its existing home sales tally for January, which is expected to slip to 4.13 million, from 4.24 million previously. High mortgage rates are still a drag on the housing market.
Through Thursday’s close, this week, the major U.S. stock market index performances were mixed. The broad Standard & Poor’s 500 index was up slightly, while the tech-heavy NASDAQ composite was off less than 0.5% and the blue-chip Dow Jones Industrial Average fell nearly 1.0% with a big drop on Thursday. Overall, stocks were in the plus column in the two-day trading period following Presidents’ Day, but share prices declined Thursday morning. Pressuring the indexes were reports from Walmart (WMT), JPMorgan Chase (JPM), Goldman Sachs (GS), and American Express (AXP).
Walmart, as is its custom, presented a cautionary outlook for near-term business. Wall Street may have overreacted, given the retailer’s solid performance of recent times and its growing, high-margined advertising business. Investors, taking a conservative stance, cashed in on banking industry leader JPMorgan Chase, investment bank Goldman Sachs, and financial services company American Express in the wake of favorable share-price gains over the past year. Concerns about lingering inflation’s impact on the economy probably played a role. The stock indexes might have trouble posting gains for the full week.
Next week, a bevy of economic data will roll in, including figures on consumer confidence, home prices, home sales, jobless claims, durable goods orders, and revised fourth-quarter 2024 gross domestic product. Most importantly, Wall Street will get the latest on inflation, via the Personal Consumption Expenditures Price Index, as well as gauges on personal income and personal spending momentum, all during January.
The Federal Reserve next meets on March 18th and March 19th to discuss its short-term interest rate policy. Currently, the federal funds rate is 4.25%-4.50%, down one percentage point from where it was one year ago. According to the minutes from the Federal Open Market Committee’s January meeting, officials were comfortable leaving rates unchanged. Given sticky inflation and the potential price effects of President Trump’s proposed tariffs on imported goods, the Fed appears to be adopting a wait-and-see posture before making any additional adjustments to rates. It’s possible rates could already be at the “neutral” level, neither promoting business expansion nor contraction.
We reiterate that investors should take a fairly cautious stance, at least over the short run, favoring large-cap industry leaders, with strong cash flows, in their portfolios. Economic and geopolitical uncertainty could result in elevated volatility in the coming months. – David M. Reimer
At the time of this article’s writing, the author held positions in none of the companies mentioned.
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