Stock Market Week January 27: What to Expect, How to Trade
In this article, I present a comprehensive analysis of the January 27-31 stock market. I delve into the crucial macroeconomic events that demand attention this week, offering insights into their potential impact on market trends. Additionally, I highlight the most intriguing stock of the week, providing in-depth analysis tailored for my Premium and Professional customers.
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Stock Market Steady Amidst Uncertainty
As the trading week wrapped up on Friday, January 25, the stock market saw the end of a four-day winning streak for the major indexes. The S&P 500 closed the week with a gain of 1.77%, the Nasdaq rose by 1.45%, and the Russell 2000 Index finished 0.88% higher. This positive momentum marked the second consecutive week of gains, fueled by encouraging inflation data and President Trump’s inauguration.
Following his inauguration, President Trump signed a series of executive orders that generated positive momentum for the stock market. This week’s stock market activity highlighted several key actions taken by Trump:
Policy Reversals: Trump repealed 78 executive orders from his predecessor, including significant climate and energy initiatives, marking a departure from policies supporting electric vehicles (EVs) and clean energy.
Regulatory Examination: He instructed his administration to assess subsidies and regulations he considered “unfair” or “market distorting,” especially those benefiting EVs. Trump issued over 50 executive orders, reestablishing several Trump-era programs.
Tax and Business Strategy: Anticipations are high that Trump will prioritize reducing corporate taxes and dismantling regulations, sparking optimism among investors and businesses.
AI Developments: On January 21, President Trump unveiled a joint venture called “Stargate” with OpenAI, Oracle, and Softbank, pledging to invest “at least $500 billion” in AI infrastructure within the United States.
Despite Trump’s tariff threats remaining just that—threats—the market’s attention is poised to shift. The looming question is how markets will respond should these threats become formal actions. Until then, profit-taking seems to be the primary motive for any selling activity. However, we will dive into the trading strategy for the week ahead after the analysis of the key macro economic events which will take place on the week of January 27-31.
Looking to the upcoming week, the spotlight will likely turn to tech earnings, with several industry giants set to report their results. Additionally, the Federal Open Market Committee (FOMC) meeting is on the horizon, though no significant changes in interest rates are anticipated. Instead, investors will likely focus on Fed Chair Jerome Powell’s remarks for clues on the economic outlook.
For the week of January 27, it’s essential to monitor key macroeconomic events that could shape market movements in the days ahead. Let’s dive in!
Economic Insights: Key U.S. Reports and Market Movements
As we approach the final week of January, several pivotal economic reports and market events are on the horizon that could influence financial markets.
Monday, January 27: The stock market is anticipated to show minimal movement, with trading activity remaining subdued. The U.S. Census Bureau is expected to release its final report on building permits and new home sales for December. Building permits are projected to decrease to 1,483,000 from November’s 1,493,000, with an end-of-quarter forecast of 1,670,000. Meanwhile, new home sales are expected to hold steady, following a November increase of 5.90% month-over-month, up from a decline of 14.80% in October.
The U.S. New Home Sales, 2022- November 2024
Tuesday, January 28: The focus shifts to the U.S. Durable Goods Orders report for December. November saw a decline of 1.1%, but expectations are set for a 1.2% increase in December. Additionally, the CB Consumer Confidence Index will be released, with a forecast of 73.20 points for January, reflecting a cautious consumer outlook. Projections for February and March suggest a gradual improvement in confidence to 75 and 77 points, respectively.
The U.S. Durable Goods Orders MoM, December 2024
Wednesday, January 29: Anticipation builds around the Federal Open Market Committee (FOMC) meeting, which could inject volatility into the stock market. The Federal Reserve’s recent rate cuts, totaling 100 basis points, have brought the target range to 4.25%–4.5%. While no changes are expected, a potential 0.25% cut could positively surprise the market. Fed Chair Jerome Powell is set to address key topics, including inflation progress, economic strength, future rate cuts, and employment goals.
Thursday, January 30: The release of U.S. GDP growth data for Q4 2024 is expected, with a projected slowdown to 1.7% from Q3’s 3.1%. A rebound to 2.3% is anticipated for Q1 2025. However, any downward revisions could disappoint the stock market. Jobless claims data will also be watched closely, indicating a slight increase from 213.5K to 214.0K.
The U.S. GDP QoQ Growth, 10y History
Friday, January 31: The week concludes with the U.S. Core PCE Index and Chicago PMI reports. The Core PCE Price Index held at 2.8% in November, with expectations of 2.58% by Q4’s end. Improvement is forecast for Q1 and Q2 2025, with predicted rates of 2.5% and 2.4%, respectively.
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The U.S. Core PCE Index, 5Y History and Forecast
In my opinion, these reports and events will provide crucial insights into the U.S. economic landscape and could shape market directions in the coming weeks.
Navigating the Market: Caution Amidst Historic Highs
As the S&P 500 Index reaches new historic highs, investors are left pondering how long this bull market can persist without a significant correction—a downturn of at least 10-15%. Remarkably, for the first time, the US stock market capitalization to GDP ratio has exceeded 200%. This milestone underscores the current era of US leadership in global markets and highlights our position within the market cycle.
To put this into perspective, as of December 2024, the MSCI Europe Index’s market capitalization stood at approximately $10.4 trillion, while the European Union’s GDP was around $18.5 trillion, resulting in a market cap to GDP ratio of merely 56%.
Additionally, foreign direct investments (FDI) in the EU were just $13.4 billion in Q3 2024, strongly contrasting the $72.5 billion FDI in the United States. The US market capitalization not only outpaced the MSCI Europe but also surpassed the Japanese stock market. This dominance points to potential risks and opportunities ahead.
Quarterly Foreign Direct Investments in the European Union, €’000
Such trends rarely persist indefinitely, and overextension often leads to eventual reversals. The key question remains: when will this reversal occur?
Given these dynamics, I advise investors to exercise caution, particularly those heavily invested in the S&P 500 Index rather than diversifying into individual stocks.
Earnings for the Week
Monday: SOFI, T, NUE, WAL,
Tuesday: BA, GM, LMT, RCL, LOGI, CB, FFIV, QRVO, SBUX, SAP, LC
Wednesday: ASML, TMUS, ADP, DHR, VFC, GD, TSLA, META, MSFT, IBM, LRCX, NOW
Thursday: UPS, MA, BX, DOW, AAPL, INTC, V, KLAC, TEAM, DECK, SKYW
Friday: CL, ABBV, PSX, XOM, CVX
The Most Intriguing Stock Pick
While we should expect a very busy earnings week, I would like to highlight one the most intriguing stock pick, which could be interesting to watch. Let’s dive in.