Cela's Weekly Insights - January 12, 2025

The first full trading week of 2025 was a rollercoaster for global markets, marked by shifts in sentiment, major corporate news, and policy-driven uncertainties. While the tech sector initially led gains, investor optimism was tempered by inflation fears, fluctuating bond yields, and labor market data that clouded expectations for Federal Reserve actions in the months ahead.

Tech Dominates Early Gains but Faces Setbacks

Chip stocks kicked off the week with a bang, driving significant gains in the Nasdaq and boosting broader market indices. Nvidia, propelled by record revenues reported by its partner Foxconn and strong AI-related growth prospects, surged to an all-time high before retreating sharply later in the week. ASML also saw substantial gains, rising over 7%, reflecting the optimism in the semiconductor sector.

The CES technology conference added to the excitement, with Nvidia unveiling a new AI superchip that initially fueled investor enthusiasm. However, despite the buzz, the company’s stock faltered as the broader market faced headwinds from inflationary pressures and higher Treasury yields. These factors dampened expectations for the Federal Reserve to ease monetary policy in the near term.

Beyond tech, Disney's announcement of a merger between Hulu + Live TV and FuboTV made waves. While Fubo shares skyrocketed nearly 250%, Disney's stock remained largely flat, reflecting a mixed reception to the strategic move.

Policy and Labor Market Data Stir Volatility

Economic data released during the week painted a complex picture. Reports from the Institute for Supply Management and the JOLTS job openings report highlighted robust demand but also raised inflation concerns. Prices in the manufacturing sector surged to their highest levels in nearly two years, and job openings exceeded expectations, though fewer hires were made—a sign that confidence in the labor market may be softening.

Adding to the uncertainty, minutes from the Federal Reserve’s December meeting revealed growing support for a slower pace of rate cuts, while labor market data showed resilience despite a cooling in private sector hiring. Investors grappled with these mixed signals, particularly as the December jobs report loomed large. The report, when released, exceeded expectations with over 250,000 jobs added and unemployment dipping to 4.1%. This strong performance, however, reignited fears of prolonged high interest rates.

Inflation and Earnings Shape Sentiment

Inflationary pressures continued to weigh heavily on markets. The University of Michigan’s consumer sentiment survey showed a sharp rise in short-term inflation expectations, unsettling investors further. Coupled with the 10-year Treasury yield climbing to its highest level since late 2023, borrowing costs increased, adding pressure on equities.

Despite these challenges, some bright spots emerged in corporate earnings. Walgreens surprised investors with a stronger-than-expected profit, signaling progress in its turnaround strategy. Delta Airlines also posted record annual revenue, benefiting from strong demand in the travel sector. Both companies’ stocks saw significant gains, offering a glimmer of optimism as the earnings season kicks off in earnest next week with major banks reporting results.

All in all, the markets’ performance this week underscored a tug-of-war between optimism in sectors like technology and travel and concerns over persistent inflation and tighter monetary policy. With key economic data continuing to shape investor expectations, the outlook remains uncertain. The interplay of strong corporate earnings and macroeconomic challenges will likely dominate the narrative in the weeks ahead, setting the tone for the rest of 2025.

Last Week's Market Performance: A Global Overview

Cela’s Weekly Insights Indicator

That's all for today, folks. For more insights, be sure to join me every weekday morning on my podcast, Capital Markets Quickie, where I break down the most important news and events in the markets.

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Endrit Cela The Investment Fella - ECB, mm, 411 ??