Although hiring slowed in January, the previous month’s job totals were revised up and the unemployment rate fell to 4 percent. International equities outperformed as a weaker dollar offset initial tariff concerns. The Treasury yield curve continued to flatten on softening economic data.
Quick Hits
- Report releases: Hiring slowed in January, but the previous month’s job totals were revised up and the unemployment rate fell to 4 percent.
- Financial market data: International equities outperformed as a weaker dollar offset initial tariff concerns.
- Looking ahead: Economic data this week will primarily focus on small business confidence, inflation, and retail sales.
Report Releases—February 3–7, 2025
Institute for Supply Management (ISM) Manufacturing Index: January (Monday)
Manufacturer confidence improved more than expected, bringing the index into expansionary territory for the first time in more than two years.
- Expected/prior ISM Manufacturing index: 50.0/49.2
- Actual ISM Manufacturing index: 50.9
ISM Services Index: January (Wednesday)
Service sector confidence fell more than expected, in part because of slower new order growth.
- Expected/prior ISM Services index: 54.0/54.0
- Actual ISM Services index: 52.8
Employment Report: January (Friday)
Hiring slowed last month, with 143,000 jobs added against calls for 175,000. Despite the slowdown in headline hiring, the unemployment rate unexpectedly fell to 4 percent.
- Expected/prior change in nonfarm payrolls: +175,000/+307,000
- Actual change in nonfarm payrolls: +143,000
Preliminary University of Michigan Consumer Sentiment Survey: February (Friday)
Consumer sentiment fell due to worsening consumer views on current economic conditions and souring expectations for the future. The one-year expected inflation level rose sharply, from 3.3 percent in January to 4.3 percent in February.
- Expected/prior consumer sentiment: 71.8/71.1
- Actual consumer sentiment: 67.8
The Takeaway
- Manufacturer confidence improved more than expected in January, but the service sector was weaker than expected.
- Consumer sentiment was lower than expected as consumers’ expectations for inflation rose.
Financial Market Data
Equity
Index | Week-to-Date | Month-to-Date | Year-to-Date | 12-Month |
S&P 500 | –0.23% | –0.23% | 2.55% | 22.30% |
Nasdaq Composite | –0.53% | –0.53% | 1.13% | 24.80% |
DJIA | –0.54% | –0.54% | 4.22% | 16.67% |
MSCI EAFE | 0.24% | 0.24% | 5.50% | 10.01% |
MSCI Emerging Markets | 1.40% | 1.40% | 3.21% | 13.25% |
Russell 2000 | –0.33% | –0.33% | 2.26% | 18.04% |
Source: Bloomberg, as of February 7, 2025
Paced by emerging markets, international equities moved higher. U.S. stocks moved modestly lower. International equities were supported by a softer U.S. dollar. There was plenty of news regarding tariffs: The week started with proposed tariffs of 25 percent on Canada and Mexico, but those were delayed for one month after discussions between the countries. China, however, was hit with a 10 percent tariff. Earnings were also a major driver, with Alphabet and Amazon moving lower after their announcements.
Fixed Income
Index | Month-to-Date | Year-to-Date | 12-Month |
U.S. Broad Market | 1.47% | 0.92% | 3.35% |
U.S. Treasury | 1.41% | 0.91% | 2.64% |
U.S. Mortgages | 1.50% | 0.96% | 3.68% |
Municipal Bond | 0.77% | 0.94% | 2.68% |
Source: Bloomberg, as of February 7, 2025
Treasury yields continued to flatten, with the front end of the curve seeing rising yields ahead of the 2-year. The part of the curve beyond the 5-year moved lower, however. Higher consumer inflation expectations and a potential tax cut have led to muted rate cut expectations for 2025, with just one cut currently expected for midyear.
The Takeaway
- International stocks continued their outperformance.
- The Treasury yield curve continued to flatten amid softening economic data.
Looking Ahead
Economic data this week will primarily focus on small business confidence, inflation, and retail sales.
- On Tuesday, we expect the NFIB Small Business Optimism Report for January. Small business optimism is expected to dip slightly after a significant rally in optimism in the fourth quarter.
- The Consumer Price Index (CPI) report for January will be released Wednesday. Year-over-year consumer inflation is set to remain unchanged at 2.9 percent.
- On Thursday, the Producer Price Index (PPI) for January will be released. Producer inflation is expected to fall modestly on a year-over-year basis.
- Finally, on Friday, retail sales for January will be released. Headline retail sales are expected to remain unchanged, whereas core sales are set to rise.
Disclosures: This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.
Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor’s. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index. The Bloomberg US Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The U.S. Treasury Index is based on the auctions of U.S. Treasury bills, or on the U.S. Treasury’s daily yield curve. The Bloomberg US Mortgage Backed Securities (MBS) Index is an unmanaged market value-weighted index of 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC), and balloon mortgages with fixed-rate coupons. The Bloomberg US Municipal Index includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than 2 years) selected from issues larger than $50 million. One basis point is equal to 1/100th of 1 percent, or 0.01 percent.
Pacific Crest Wealth Planning is located at 11209 Brockway Rd, Suite C-203, Truckee CA 96161 and can be reached at 530-563-5250. John C. Manocchio, CFP®, CRPC® (CA Insurance Lic. #0H73423) is an Investment Adviser Representative with/and offers advisory services through Commonwealth Financial Network®, a Registered Investment Adviser.
Authored by the Investment Research team at Commonwealth Financial Network.
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