Stock futures are showing the major market indexes are likely to open in a slightly positive fashion this morning. Prior to the opening bell, the U.S. Bureau of Labor Statistics released data for the month of February. Job additions totaled just 151,000. Economists had estimated a gain of 170,000 workers and, in the previous month, the labor force grew by 125,000 (revised down from 143,000). The domestic unemployment rate came in at 4.1%, a tick higher than the 4.0% level reported for January. Average hours worked in a week stayed tepid at 34.1. Labor participation edge lower to 62.4% from 62.6% a month ago.
Hourly wages advanced 0.3% last month, on a par with estimates and below the strong 0.5% jump reported in the month before. On a year-over-year basis, pay rose 4.0%, relative to an anticipated 4.2% and the January pace of 4.1%. In total, the data was not as bad as many had feared, supporting a favorable start to today’s trading. We note, however, that, lately, in the headlines, investors have learned of new high-profile layoffs. Despite the decent employment numbers, evidence is emerging that companies are becoming conservative about hiring, given President Trump’s developing trade policy.
During the remainder of today, several Federal Reserve officials, including Chairman Jerome Powell, will speak on the central bank’s inflation-fighting strategy and the health of the economy. Next week, February inflation data (consumer and producer prices) will roll out. The Fed will meet on the 18th and 19th of this month to decide whether or not to adjust short-term interest rates, currently in the range of 4.25%-4.50%. A majority on Wall Street is of the opinion that the federal funds rate will stay unchanged.
There is concern among economists, market analysts, investors, businesses, and consumers that President Trump’s implementation of harsh import tariffs will reignite inflation and slow the U.S. economy. Businesses are being conservative about investments in operations, including expansion. In recent days, the Treasury yield curve momentarily inverted, with short-term note rates rising above those of long-dated bonds. Though not a certainty, this suggests a recession could be in the offing.
President Trump has shown a willingness to make modest adjustments to his tariff plan to safeguard domestic manufacturers, especially the auto makers. Given the heightened potential for disrupted global supply chains and a reacceleration of inflation, however, uncertainty on Wall Street has increased. Share-price volatility is on the upswing. The major market indexes have lost the gains scored just after the presidential election, when there was much optimism over the prospect of less government regulation and no increases in corporate taxes.
This week, the blue-chip Dow Jones Industrial Average and the broader Standard & Poor’s 500 both appear on track to suffer low-single-digit losses. The tech-heavy NASDAQ might well drop in the mid-single-digits, after having already fallen into correction territory (a decline of 10% or more from a recent high). The latest corporate earnings season was a good one, but more and more business leaders are voicing concerns about potential growth for the rest of calendar 2025. Notably, consumers are becoming increasingly gloomy about the near-term economy.
At this juncture, investors would probably do well to build a core of high-quality, cash-generating, large-cap sector leaders in their individual portfolios. Those with ample cash reserves can opportunistically buy leading equities, with favorable historical records of delivering positive total returns, on any significant share-price pullbacks. We’re cautiously optimistic that the major market indexes can post incremental, though not likely stellar, gains this year. - 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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