Tag: inflation

The Markets (as of market close April 11, 2025)

A late-week rally helped push stocks higher to close a turbulent week on a favorable note. Last week began with stocks mixed as investors tried to gauge President Trump’s on-again, off-again tariff policy. Ten-year Treasury yields jumped nearly 20 basis points to 4.20% last Monday, rebounding from the previous week’s six-month low. Stocks retreated last Tuesday following the administration’s threat of a 104% tariff on China, effective the following day. However, investors returned to risk after President Trump announced a 90-day pause on many of his new tariffs. The market enjoyed its best day in several years as the S&P 500 gained 9.5%, the Dow rose 7.9%, and the NASDAQ climbed 12.2%. Wall Street reversed course on Thursday, cutting into most of the prior day’s gains. Investors re-focused their attention on the likelihood of a trade war with China. Typical of the volatile week, stocks rebounded to close out the week as optimism grew over a possible trade deal between the U.S. and China. Market sector performance was mixed, with information technology, communication services, and consumer discretionary outperforming, while real estate, financials, and energy lagged.

Stock Market Indexes

Market/Index	2024 Close	Prior Week	As of 4/11	Weekly Change	YTD Change
DJIA	42,544.22	38,314.86	40,212.71	4.95%	-5.48%
NASDAQ	19,310.79	15,587.79	16,724.46	7.29%	-13.39%
S&P 500	5,881.63	5,074.08	5,363.36	5.70%	-8.81%
Russell 2000	2,230.16	1,827.03	1,860.20	1.82%	-16.59%
Global Dow	4,863.01	4,685.08	4,780.86	2.04%	-1.69%
fed. funds target rate	4.25%-4.50%	4.25%-4.50%	4.25%-4.50%	0 bps	0 bps
10-year Treasuries	4.57%	3.98%	4.49%	51 bps	-8 bps
US Dollar-DXY	108.44	103.12	99.87	-3.15%	-7.90%
Crude Oil-CL=F	$71.76	$62.59	$61.56	-1.65%	-14.21%
Gold-GC=F	$2,638.50	$3,058.70	$3,251.50	6.30%	23.23%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

• Inflation trended lower in March, according to the latest Consumer Price Index, which fell 0.1% last month after increasing 0.2% in February. Over the last 12 months, the CPI rose 2.4% after increasing 2.8% for the 12 months ended in February. Prices for energy fell 2.4%, largely on the heels of a 6.3% decline in gasoline prices, which offset increases in prices for electricity and natural gas. Prices for food, on the other hand, rose 0.4% in March. Core prices, less food and energy, rose 0.1% last month following a 0.2% increase in February. Core prices rose 2.8% over the last 12 months, the smallest 12-month increase since the period ended March 2021.
• Prices at the wholesale level fell 0.4% in March, according to the Producer Price Index (PPI). The PPI increased 0.1% in February. For the 12 months ended in March, the PPI advanced 2.7%. Over 70% of the decrease in wholesale prices in March was traced to a 0.9% decline in prices for goods, which was the largest decrease since October 2023. Gasoline prices fell 11.1% in March, accounting for two-thirds of the decline in prices for goods. Prices for services fell 0.2% last month. Prices less foods, energy, and trade services edged up 0.1% in March after increasing 0.4% in each of the previous three months. For the 12 months ended in March, prices less foods, energy, and trade services advanced 3.4%.
• The federal government budget deficit was $161 billion in March. Receipts were $368 billion, while expenditures totaled $528 billion. For fiscal year 2025, the deficit sits at $1,307 billion. Total receipts were $2,260 billion. Government outlays were $3,567 billion. Over the same period in the prior fiscal year, the deficit was $1,065 billion. Receipts were $2,188 billion, while expenditures were $3,253 billion.
• The national average retail price for regular gasoline was $3.243 per gallon on April 7, $0.081 per gallon above the prior week’s price but $0.348 per gallon less than a year ago. Also, as of April 7, the East Coast price ticked up $0.087 to $3.079 per gallon; the Midwest price increased $0.029 to $3.103 per gallon; the Gulf Coast price rose $0.111 to $2.841 per gallon; the Rocky Mountain price increased $0.054 to $3.165 per gallon; and the West Coast price rose $0.139 to $4.320 per gallon.
• For the week ended April 5, there were 223,000 new claims for unemployment insurance, an increase of 4,000 from the previous week’s level. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended March 29 was 1.2%. The advance number of those receiving unemployment insurance benefits during the week ended March 29 was 1,850,000, a decrease of 43,000 from the previous week’s level, which was revised down by 10,000. States and territories with the highest insured unemployment rates for the week ended March 22 were Rhode Island (2.7%), New Jersey (2.6%), California (2.4%), Massachusetts (2.3%), Minnesota (2.3%), Washington (2.3%), Illinois (2.1%), District of Columbia (1.9%), New York (1.9%), and Montana (1.8%). The largest increases in initial claims for unemployment insurance for the week ended March 29 were in Kentucky (+2,810), Illinois (+1,286), Iowa (+937), Wisconsin (+742), and Ohio (+404), while the largest decreases were in Texas (-765), Pennsylvania (-755), Massachusetts (-603), Arizona (-519), and New Jersey (-436).

Eye on the Week Ahead

The latest data on sales at the retail level is available this week. February saw retail sales tick up 0.2% for the month. Also out this week is the estimate of industrial production for March. Industrial production rose 0.7% in February, while manufacturing output increased 0.9%.

The Markets (first quarter through March 31, 2025)

Wall Street got off to a good start to begin the first quarter of 2025 and continued to rally for much of the quarter. Several of the benchmark indexes reached record highs in January through mid-February. However, U.S. stocks closed the first quarter in a tailspin, unable to keep pace with major global stocks. Following the presidential election, investors began the quarter hopeful that the new administration would encourage economic growth and lasso inflation. However, the Trump administration embarked on an economic policy that threatened or imposed tariffs on goods from major trade partners including Canada, Mexico, and China, as well as the European Union. Throughout March, investors worried about the impact of a trade war, rising inflation, and a potential economic recession. Both the personal consumption expenditures (PCE) price index and the Consumer Price Index (CPI) moved little for much of the quarter, however, core prices (excluding volatile food and energy segments) increased on an annual basis, moving farther from the Federal Reserve’s 2.0% target rate. In response, the Federal Reserve maintained the federal funds target rate range at 4.25%-4.50%. The unemployment rate edged up to 4.1% in February. In this context, U.S. stocks declined in March and for the quarter. The S&P 500 lost nearly 5.0%, while the NASDAQ declined over 10.0%. Among the market sectors, the first quarter saw consumer discretionary fall more than 16.0%, information technology decline about 15.0%, and communication services drop nearly 8.0%. On the other hand, energy outperformed by a large margin, gaining more than 10.0% from the beginning of the year. Rising bond prices weighed on yields, with the yield on 10-year Treasuries closing lower in each month of the quarter as investors sought safety amid escalating trade tensions. The yield on the 2-year note ended the quarter at about 3.92%, a decrease of 28.0 basis points from the beginning of the quarter. By the end of the quarter, nearly 70 S&P 500 companies reported negative earnings per share, which is above the five-year average of 57 and higher than the 10-year average of 62. According to FactSet, the number of companies issuing positive earnings per share is below the five-year average but a tick above the 10-year average.

Gold, considered a safe haven during volatile economic times, had its best quarter since 1986 after rising nearly 20.0% in the first quarter as the potential trade war and economic slowdown sent worried investors scurrying for more stable investments. Crude oil prices fluctuated throughout much of the quarter, ultimately ending up about where they began. Moving forward, a new round of tariffs set to take effect during the first week of April, could heighten fears of a global trade war, which could slow economic growth and curtail demand for energy. The retail price for regular gasoline was $3.115 per gallon on March 24, $0.010 below the price a month earlier but $0.072 more than the price at the beginning of the first quarter. Regular retail gas prices decreased $0.408 from a year ago. According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.65% as of March 13. That’s up from 6.63% one week ago but down from 6.74% one year ago

January began the year and the first quarter on a high note. Stocks moved generally higher, with each of the benchmark indexes listed here closing higher. The S&P 500 gained 2.7%, the NASDAQ climbed 1.6%, and the Dow rose 4.7%. The Federal Reserve met in January and held the key policy rate at 4.25%-4.50% following three consecutive rate cuts. The yields on 10-year Treasuries closed at 4.56% after climbing to 4.80% mid-month. Inflation proved stubborn as both the CPI and the PCE price index increased year over year. Throughout the month, investors tried to digest the plethora of executive orders signed by President Trump. In addition, the administration imposed new tariffs on Canada, Mexico, and China, creating uncertainty around global trade relations. While most of the market sectors closed higher, tech shares took a hit as a new Chinese AI company shook the industry.

Stocks ended February lower, with information technology, consumer discretionary, communications, and industrials underperforming. Bond prices climbed higher, pulling yields lower. The dollar index ticked lower, while gold prices moved modestly higher. Crude oil prices fell nearly 5.0% in February, marking the first monthly loss since November 2024. President Trump’s policies relative to tariffs, immigration, taxes, the Middle East, and the Ukraine/Russia conflict weighed on market sentiment. Mixed economic data and a hotter-than-expected CPI added to concerns of recession and stagflation. Ten-year Treasury yields fell 36.0 basis points.

The market volatility that began in February increased in March. Tariffs, persistent inflation, and the threat of global economic turmoil hit investors hard. Consumer confidence trended lower, notably future expectations, which fell to a 12-year low to a rate that could signal an economic recession. Each of the benchmark indexes declined in value, with the NASDAQ falling more than 8.0%. The energy sector was the only one to close March in the black. The remaining market sectors trended lower, with communication services and information technology underperforming notably. The dollar index declined under the weight of economic uncertainty. Gold prices, on the other hand, reached a record high. Crude oil prices moved higher after President Trump intimated that additional tariffs on Russia could be in the offing, which could lead to supply concerns.

Stock Market Indexes

Market/Index	2024 Close	As of March 31	Monthly Change	Quarterly Change	YTD Change
DJIA	42,544.22	42,001.76	-4.20%	-1.28%	-1.28%
NASDAQ	19,310.79	17,299.29	-8.21%	-10.42%	-10.42%
S&P 500	5,881.63	5,611.85	-5.75%	-4.59%	-4.59%
Russell 2000	2,230.16	2,011.01	-7.03%	-9.83%	-9.79%
Global Dow	4,863.01	5,106.01	-2.10%	5.00%	5.00%
fed. funds target rate	4.25%-4.50%	4.25%-4.50%	0 bps	0 bps	0 bps
10-year Treasuries	4.57%	4.24%	4 bps	-33 bps	-33 bps
US Dollar-DXY	108.44	104.19	-3.13%	-3.92%	-3.92%
Crude Oil-CL=F	$71.76	$71.38	2.04%	-0.53%	-0.53%
Gold-GC=F	$2,638.50	$3,156.40	10.08%	19.63%	19.63%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Latest Economic Reports

• Employment: Job growth was slightly below expectations in February, with the addition of 151,000 new jobs after a downward revision of 18,000 new jobs in January, from 143,000 to 125,000. In February, the unemployment rate increased 0.1 percentage point to 4.1%. The number of unemployed persons rose by 203,000 to 7.1 million in February. The number of long-term unemployed (those jobless for 27 weeks or more) was 1.5 million, essentially unchanged from the January figure. These individuals accounted for 20.9% of all unemployed persons. The labor force participation rate in February was 62.4%, down 0.2 percentage point from the previous month. The employment-population ratio also decreased 0.2 percentage point to 59.9% in February. Average hourly earnings increased by $0.10, or 0.3%, to $35.93 in February. Since February 2024, average hourly earnings rose by 4.0% (4.1% for the 12 months ended in January 2025). The average workweek was unchanged at 34.1 hours in February.
• There were 224,000 initial claims for unemployment insurance for the week ended March 22, 2025. During the same period, the total number of workers receiving unemployment insurance was 1,856,000. A year ago, there were 214,000 initial claims, while the total number of workers receiving unemployment insurance was 1,802,000.
• FOMC/interest rates: The Federal Open Market Committee left the federal funds rate at the current 4.25%-4.50% following its meeting in March. The projected path of monetary policy points to two interest rate cuts of 25.0 basis points each by the end of 2025.
• GDP/budget: The economy, as measured by gross domestic product, accelerated at an annualized rate of 2.4% in the fourth quarter following an increase of 3.1% in the third quarter. GDP expanded at an annualized rate of 2.8% in 2024, compared with an annual increase of 2.9% in 2023. Consumer spending, as measured by the Personal Consumption Expenditures index, rose 4.0% in the fourth quarter following a 3.7% rise in the third quarter. Spending on services rose 3.0% in the fourth quarter, compared with a 2.8% increase in the third quarter. Consumer spending on goods increased 6.2% in the fourth quarter (5.6% in the third quarter). Fixed investment declined 1.1% in the fourth quarter after increasing 2.1% in the third quarter. Nonresidential (business) fixed investment declined 3.0% in the fourth quarter after climbing 4.0% in the previous quarter. Residential fixed investment rose 5.5% in the fourth quarter following a 4.3% decrease in the third quarter. Exports fell 0.2% in the fourth quarter, compared with a 9.6% increase in the previous quarter. Imports, which are a negative in the calculation of GDP, decreased 1.9% in the fourth quarter after rising 10.7% in the third quarter.
• February saw the federal budget deficit come in at $307.0 biillion, compared to a deficit of $296.3 billion a year ago. The deficit for the first five months of fiscal year 2025, at $1,147.0 trillion, is well above the $828.0 billion deficit over the first five months of the previous fiscal year. So far in fiscal year 2025, government receipts totaled $1,893.0 trillion, while government outlays totaled $3,039.0 trillion. Through the first five months of fiscal year 2025, individual income tax receipts added up to $959.0 billion, while outlays for Social Security totaled $631.0 billion.
• Inflation/consumer spending: According to the latest Personal Income and Outlays report, personal income rose 0.8% in February, while disposable personal income increased 0.9% last month after both increased 0.7% in January. Consumer spending increased 0.4% in February after decreasing 0.3% the previous month. Consumer prices inched up 0.3% in February for the third straight month. Excluding food and energy (core prices), prices rose 0.4% in February. Consumer prices rose 2.5% for the 12 months ended in February, unchanged from the same period ended in January. Core prices increased 2.8% over the last 12 months. Since February 2024, prices for food rose 1.5%, while energy prices decreased 1.1%.
• The increase in consumer prices slowed in February following a more rapid increase between November 2024 and January 2025. The Consumer Price Index rose by just 0.2% in February after advancing 0.5% in January. Over the 12 months ended in February, the CPI rose 2.8%, 0.2 percentage point below the rate for the 12 months ended in January. Core prices (excluding food and energy) also ticked up 0.2% last month and 3.1% since February 2024. Prices for shelter rose 0.3% in February (and 4.2% for the last 12 months), accounting for nearly half of the February increase. Food prices increased 0.2% last month and 2.6% for the year. Energy prices rose 0.2% in February but declined 0.2% since February 2024. Gasoline prices decreased 1.0% in February and 3.1% over the last 12 months.
• Prices at the wholesale level were flat in February, according to the latest Producer Price Index. Producer prices increased 3.2% for the 12 months ended in February, a decrease of 0.2 percentage point from the estimate for the 12-month period ended in January. Excluding food and energy, producer prices fell 0.1% in February but increased 3.4% for the year. In February, prices for goods rose 0.3% (0.6% in January) and 1.7% since February 2024 (2.3% for the 12 months ended in January). Last month saw prices for services fall 0.2% after advancing 0.6% in January. Prices for services have risen 3.9% for the 12 months ended in February, a decrease of 0.2 percentage point from the increase over the 12 months ended in January.
• Housing: Sales of existing homes increased 4.2% in February but were 1.2% under the February 2024 figure. The median existing-home price was $398,400 in February, above the January estimate of $393,400 and higher than the year-earlier price of $383,800. Unsold inventory of existing homes in February represented a 3.5-month supply at the current sales pace, unchanged from the January estimate but above the 3.0-month supply in February 2024. Sales of existing single-family homes increased 5.7% in February but were 0.3% below the estimate from a year earlier. The median existing single-family home price was $402,500 in February ($398,100 in January), above the February 2024 estimate of $388,000.
• New single-family home sales rose 18.9% in February but were 1.8% below the February 2024 figure. The median sales price of new single-family houses sold in February was $414,500 ($427,400 in January) down from the February 2024 estimate of $420,900. The February average sales price was $487,100 ($507,900 in January), below the February 2024 average sales price of $509,700. Inventory of new single-family homes for sale in February represented a supply of 8.9 months at the current sales pace, slightly lower than the January estimate of 9.0 months but above the 8.7-month supply from a year earlier.
• Manufacturing: Industrial production increased 0.7% in February following a 0.3% advance in January. Manufacturing output gained 0.9% last month after ticking up 0.1% in January. In February, mining increased 2.8%, while utilities fell 2.5%. Over the 12 months ended in February, total industrial production was 1.4% above its year-earlier reading. Since February 2024, manufacturing increased 0.7%, utilities rose 8.7%, while mining was unchanged.
• New orders for durable goods unexpectedly increased 0.9% in February after rising 3.3% in the prior month. For the 12 months ended in February, durable goods orders advanced 2.3%. Excluding transportation, new orders rose 0.7% in February from the prior month. Excluding defense, new orders advanced 0.8%. Transportation equipment, which increased 1.5% for the second straight month, led the overall increase in new orders in February.
• Imports and exports: Import prices exceeded expectations after rising 0.4% in February, the same increase as in January. Prices for imports rose 2.0% over the last 12 months. Higher fuel and nonfuel prices in February contributed to the overall increase in import prices. Import fuel prices advanced 1.7% in February after increasing 3.5% in January. Import fuel prices rose 2.8% over the past 12 months ended in February. Prices for nonfuel imports edged up 0.3% in February and advanced 2.0% over the last 12 months. Prices for exports rose 0.1% in February, following a 1.3% advance in January. Higher agricultural and nonagricultural export prices each contributed to the increase in February. Export prices rose 2.1% over the past year.
• The international trade in goods deficit in February was $147.9 billion, 4.9% less than the January estimate. Exports of goods for February were 4.1% above January exports. Imports of goods for February were 0.2% less than January imports. Over the 12 months ended in February, the goods deficit grew by about $56.0 billion. Exports rose 2.5%, while imports increased 22.5%.
• The latest information on international trade in goods and services, released March 6, saw the goods and services deficit jump 34.0% in January to $131.1 billion. Exports of goods increased 1.2% to $269.8 billion in January. Imports of goods were $401.2 billion in January, an increase of 10.0% over the December figure. For the 12 months ended in January 2025, the goods and services deficit increased $64.5 billion, or 96.5%, from January 2024. Exports increased $10.6 billion, or 4.1%. Imports increased $75.2 billion, or 23.1%.
• International markets: Global markets trended lower in March as concerns over a trade war dampened the economic outlook and curbed investor sentiment. The German inflation rate slowed to 2.2% in March, the lowest it’s been since November 2024. The European Central Bank is expected to cut its key interest rate in mid-April as inflation data seems to be heading toward the ECB’s 2.0% target. While China’s stock market managed to trend higher last month, that country’s industrial output fell by 3.6% over the last 12 months, marking the steepest decline since May 2023. In March, the STOXX Europe 600 Index fell 5.1%; the United Kingdom’s FTSE declined 3.4%; Japan’s Nikkei 225 Index fell 5.7%; and China’s Shanghai Composite Index ticked up 0.6%.
• Consumer confidence: The Conference Board Consumer Confidence Index® declined for a fourth straight month in March after falling 7.2 points to 92.9. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, dropped 3.6 points to 134.5 in March. The Expectations Index, based on consumers’ short-term outlook for income, business, and labor market conditions, tumbled 9.6 points to 65.2 in March, the lowest level in 12 years and well below the 80 point threshold that usually signals an impending recession.

Eye on the Quarter Ahead

The Federal Reserve does not meet in April, so there will be some time to determine the impact of President Trump’s economic policy and tariffs.

The Markets (as of market close March 21, 2025)

Wall Street saw a weekly gain for the for the first time in four weeks. Fed forecasts of two more interest rate cuts this year (see below) helped renew investor confidence. Each of the benchmark indexes closed higher last week, led by the Dow, which gained over 1.0%. All 11 of the S&P market sectors advanced, led by financials, health care, industrials, and information technology. Bond values rose higher, dragging yields to their lowest levels in more than two weeks. Despite ticking lower at the end of the week, gold prices rose over 1.2%. Considered a safe-haven asset, gold prices have enjoyed 16 record highs this year, reaching an all-time peak of $3,057.21 per ounce on Thursday. Since January 2024, the price of gold has risen 45.0%, or about $1,000.00 per ounce.

Stocks rose higher last Monday for the second straight session. The Russell 2000 gained 1.2% to lead the benchmark indexes listed here. The Global Dow rose 1.1%, the Dow climbed 0.9%, the S&P 500 added 0.6%, and the NASDAQ advanced 0.3%. Yields on 10-year Treasuries ticked up to 4.30%. Crude oil prices gained 0.5% to settle at $67.51 per barrel. The dollar declined, while gold prices reached a record high after climbing to $3,008.70 per ounce.

A selloff in tech stocks dragged the markets lower last Tuesday. The NASDAQ fell 1.7%, and the S&P 500 declined 1.1%. The small caps of the Russell 2000 lost 0.9%, and the Dow dropped 0.6%. The Global Dow eked out a 0.2% gain. The crude oil price rally ended last Tuesday as prices fell 1.0% to $66.92 per barrel. Yields on 10-year Treasuries dipped to 4.28%. The dollar index fell 0.1%, while gold prices continued to surge, gaining 1.2% to reach a new record high.

Wall Street rebounded last Wednesday after the Federal Reserve projected two more rate cuts later this year. Tech shares reversed the prior day’s losses, driving the NASDAQ up 1.4%. The Russell 2000, an index driven, in part, by changing economic conditions, led the benchmark indexes listed here, gaining 1.6%. The S&P 500 rose 1.1%, the Dow climbed 0.9%, and the Global Dow edged up 0.5%. Gold prices moved higher, reaching another record after gaining 0.5%. Ten-year Treasury yields fell to 4.25%. Crude oil prices rose to $67.25 per barrel. The dollar gained 0.3% against a basket of currencies.

Last Wednesday’s Fed-driven rally ended quickly on Thursday as investors reassessed the potential for rising inflation and an economic slowdown. The Russell 2000 lost 0.6%, followed by the Global Dow (-0.4%), the NASDAQ (-0.3%), and the S&P 500 (-0.2%). The Dow was essentially unchanged. Ten-year Treasury yields dipped to 4.23%. Crude oil prices advanced for the third session of the week, settling at about $68.30 per barrel. The dollar and gold prices each gained 0.4%.

Stocks closed mostly higher last Friday after President Trump suggested that he is willing to consider some flexibility on tariffs. The NASDAQ rose 0.5%, while the Dow and the S&P 500 each gained 0.1%. The Russell 2000 and the Global Dow each retreated 0.6% and 0.3%, respectively. Yields on 10-year Treasuries inched up to 4.25%. Crude oil prices rose 0.3%. The dollar index gained 0.3%, while gold prices fell 0.5%.

Stock Market Indexes

Market/Index	2024 Close	Prior Week	As of 3/21	Weekly Change	YTD Change
DJIA	42,544.22	41,488.19	41,985.35	1.20%	-1.31%
NASDAQ	19,310.79	17,754.09	17,784.05	0.17%	-7.91%
S&P 500	5,881.63	5,638.94	5,667.56	0.51%	-3.64%
Russell 2000	2,230.16	2,044.10	2,056.98	0.63%	-7.77%
Global Dow	4,863.01	5,156.74	5,198.52	0.81%	6.90%
fed. funds target rate	4.25%-4.50%	4.25%-4.50%	4.25%-4.50%	0 bps	0 bps
10-year Treasuries	4.57%	4.30%	4.25%	-5 bps	-32 bps
US Dollar-DXY	108.44	103.70	104.14	0.42%	-3.97%
Crude Oil-CL=F	$71.76	$67.18	$68.29	1.65%	-4.84%
Gold-GC=F	$2,638.50	$2,991.20	$3,028.10	1.23%	14.77%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

• In a move that was expected, the Federal Open Market Committee decided to keep the target range for the federal funds rate at its current 4.25%-4.50%. In support of its decision, the Committee noted that economic activity continued to expand at a solid pace, the unemployment rate stabilized at a low level, and labor market conditions remained solid. However, inflation remained somewhat elevated and uncertainty around the economic outlook has increased. Moving forward, the Committee will take into consideration a wide range of information, including readings on labor market conditions, inflation pressures and expectations, and financial and international developments. As such, the FOMC would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals of maximum employment and inflation of 2.0%. The latest projections from the Committee indicate two more interest rate cuts later this year.
• Sales at the retail level fell short of expectations in February. Retail sales rose 0.2% last month and 3.1% since February 2024. Retail trade sales were up 0.5% from January 2025 and up 3.4% from last year. Food and beverage store sales were up 3.9% from last year, while nonstore (online) retailer sales were up 6.5% from February 2024.
• The number of issued residential building permits declined 1.2% in February from the January estimate. The February total was 6.8% below the February 2024 rate. Single-family building permits dipped 0.2% in February. Housing starts rose 11.2% last month but were 2.9% below the prior year’s estimate. Single-family housing starts in February were 11.4% above the January figure. Housing completions in February were 4.0% below the January estimate and 6.2% under the February 2024 rate. Single-family housing completions in February were 7.1% above the January rate.
• Sales of existing homes rose 4.2% in February. Year over year, existing-home sales slid 1.2%. The median existing-home price in February was $398,400, 1.3% above the January price ($393,400) and up 3.8% from one year ago ($383,800). Unsold inventory sat at a 3.5-month supply at the current sales pace, identical to January and up from 3.0 months in February 2024. Sales of existing single-family homes rose 5.7% in February but 0.3% below the estimate from a year ago. The median existing single-family home price was $402,500 in February ($398,100 in January) well above the February 2024 price of $388,000. According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.65% as of March 13. That’s up from 6.63% one week ago but down from 6.74% one year ago.
• Industrial production (IP) increased 0.7% in February after moving up 0.3% in January. Manufacturing output rose 0.9%, boosted by a jump of 8.5% for motor vehicles and parts. The output of manufacturing excluding motor vehicles and parts increased 0.4%. Mining gained 2.8%, while utilities decreased 2.5%. Total IP in February was 1.4% above its year-earlier level.
• U.S. import prices increased 0.4% in February following a 0.4% advance in January. Higher fuel and nonfuel prices in February contributed to the overall increase in import prices. Prices for U.S. imports rose 2.0% over the past year. U.S. export prices rose 0.1% in February following a 1.3% advance the previous month. Higher prices for nonagricultural and agricultural exports each contributed to the increase in February. U.S. export prices have not declined on a one-month basis since September 2024. Prices for U.S. exports increased 2.1% over the past year.
• The national average retail price for regular gasoline was $3.058 per gallon on March 17, $0.011 per gallon below the prior week’s price and $0.395 per gallon less than a year ago. Also, as of March 17, the East Coast price ticked up $0.004 to $2.949 per gallon; the Midwest price decreased $0.005 to $2.894 per gallon; the Gulf Coast price declined $0.051 to $2.629 per gallon; the Rocky Mountain price increased $0.038 to $2.998 per gallon; and the West Coast price dipped $0.038 to $4.061 per gallon.
• For the week ended March 15, there were 223,000 new claims for unemployment insurance, an increase of 2,000 from the previous week’s level, which was revised up by 1,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended March 8 was 1.2%. The advance number of those receiving unemployment insurance benefits during the week ended March 8 was 1,892,000, an increase of 33,000 from the previous week’s level, which was revised down by 11,000. States and territories with the highest insured unemployment rates for the week ended March 1 were Rhode Island (3.0%), New Jersey (2.9%), Minnesota (2.5%), California (2.4%), Massachusetts (2.4%), Illinois (2.3%), Washington (2.3%), Montana (2.2%), Pennsylvania (2.0%), Connecticut (1.9%), District of Columbia (1.9%), and New York (1.9%). The largest increases in initial claims for unemployment insurance for the week ended March 8 were in California (+4,280), Texas (+1,470), Virginia (+1,155), Michigan (+910), and Arizona (+457), while the largest decreases were in New York (-15,113), Wisconsin (-1,766), Missouri (-862), Kentucky (-825), and Ohio (-666).

Eye on the Week Ahead

The final estimate of gross domestic product for the fourth quarter is available this week. The economy expanded at an annualized rate of 2.3% in the fourth quarter, according to the second estimate. The latest Personal Income and Outlays report for February is also out this week. January data showed that consumer spending, a main driver of the economy, declined 0.2%, while consumer prices rose 0.3%.

Overview

The year 2024 was extraordinary for the economy and the markets. High interest rates, rising unemployment, turmoil in the Middle East, and the ongoing Russia/Ukraine war, were some of the many factors that should have signaled economic contraction and a downturn in the stock market. Yet, the opposite occurred. Gross domestic product expanded by 3.1% in the third quarter and 2.9% year over year. Each of the major stock market indexes listed here posted solid year-end gains. Inflation came down. Corporate earnings grew, despite the unemployment rate inching higher.

While data showed price pressures slowed in 2024, consumers faced the stark reality of the overall high cost of living. According to the Consumer Price Index (CPI), prices for food rose 2.4% for the 12 months ended in November, while shelter prices rose 4.7%. Prices at the wholesale level rose 3.0% for the year, the largest increase since moving up 4.7% for the 12 months ended February 2023.

The economy grew in 2024, proving that it was able to withstand the Federal Reserve’s aggressive policy of interest rate hikes from the previous year. Consumer spending remained strong, despite rising unemployment, which provided a boost to the overall economy. In addition, increased nonresidential (business) spending, headed by cash-rich technology companies, and solid wage and income growth, all contributed to overall economic strength. However, economic conditions were at the top of consumer concerns throughout much of 2024, particularly in the context of the presidential election. Consumer sentiment drooped in December amid weaker assessments of the present situation, while short-term expectations for business and labor saw a sharp decline.

In March 2022, the Federal Reserve began to aggressively raise interest rates as part of a restrictive policy aimed at reining in escalating inflation. In 2023, there were signs that the Fed’s monetary policy was paying off. Price growth slowed without triggering a recession. In 2024, the CPI declined intermittently, moving from 3.1% in January to a low of 2.4% in September, before ticking higher to 2.7% in November, still above the Fed’s 2.0% target. The progress in moderating price pressures, coupled with economic resilience, allowed the Fed to lower interest rates by 100 basis points by the end of the year. Nevertheless, interest rate projections for 2025 were tempered as the Fed signaled only two rate cuts, depending on inflation and economic data.

The housing sector, which cooled in 2023 on the heels of higher interest rates, rebounded somewhat in 2024. Although the Fed reduced the federal funds rate, mortgage interest rates remained elevated. According to Bankrate, the 30-year fixed-rate mortgage was 7.03% as of December 30. That’s down from a high of 7.39% in May. With the Fed tempering its projections for interest rate cuts in 2025, the consensus is that mortgage rates will remain at or near their current levels. Purchase prices for both new and existing homes also increased year over year. Despite rising lending rates and higher home prices, both new and existing home sales rose over the course of the year.

The U.S. economy proved to be resilient in 2024. Gross domestic product expanded during each of the first three quarters of the year, culminating in a 3.1% advance in the third quarter. Consumer spending, the linchpin of the economy, also showed strength, climbing 3.7% in the third quarter. Consumer spending on both goods and services rose throughout the year.

The employment sector, expected by some to slow with rising interest rates, maintained strength throughout the year. While the number of new jobs trended lower during the second half of the year, job growth averaged 186,000 per month through November. The number of employed persons changed little from a year earlier. The total number of unemployed rose by 883,000 since November 2023, while the unemployment rate, at 4.2%, was 0.5 percentage point above the year-earlier rate.

One of the primary factors in the drop in overall inflation was a decline in energy prices. According to the CPI, energy prices fell 3.2% over the 12 months ended in November. Gasoline prices dropped 8.1% over the same period. Food prices, on the other hand, rose 2.4%, while prices for shelter increased 4.7%.

Total industrial production declined 0.9% for the year. Manufacturing, which accounts for about 78.0% of total production, decreased 1.0%. There was little optimism from purchasing managers about the state of the manufacturing sector, which saw falling output and higher prices. On the other hand, purchasing managers reported that the services sector expanded at the steepest rate in 33 months amid growing optimism about business conditions under the incoming Trump administration.

As 2024 drew to a close, there were some positives to consider upon entering the new year. By the end of 2024, Wall Street enjoyed the best two-year run since 1997-1998. If corporate earnings continue to grow, that would bode well for stocks in 2025. There are factors that will come into play next year, but how they impact the economy and markets is open to speculation. How much longer will the Russia/Ukraine war last, and how much more financial aid will be coming from the United States? The Hamas/Israel conflict could expand to include other countries, impacting other lives and economies.

Market/Index	2023 Close	As of 9/30	2024 Close	Month Change	Q4 Change	2024 Change
DJIA	37,689.54	42,330.15	42,544.22	-5.27%	0.51%	12.88%
Nasdaq	15,011.35	18,189.17	19,310.79	0.48%	6.17%	28.64%
S&P 500	4,769.83	5,762.48	5,881.63	-2.50%	2.07%	23.31%
Russell 2000	2,027.07	2,229.97	2,230.16	-8.40%	0.01%	10.02%
Global Dow	4,355.28	5,029.62	4,863.01	-3.06%	-3.31%	11.66%
fed. funds target rate	5.25%-5.50%	4.75%-5.00%	4.25%-4.50%	-25 bps	-50 bps	-100 bps
10-year Treasuries	3.86%	3.80%	4.57%	40 bps	77 bps	71 bps
US Dollar-DXY	101.39	100.75	108.44	2.55%	7.63%	6.95%
Crude Oil-CL=F	$71.30	$68.35	$71.76	5.53%	4.99%	0.65%
Gold-GC=F	$2,072.50	$2,654.60	$2,638.50	-0.70%	-0.61%	27.31%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Snapshot 2024

The Markets

• Equities: Stocks began 2024 on a positive note and ended the year trending higher. Throughout the year, Wall Street bucked analysts’ predictions. Higher interest rates and rising unemployment didn’t deter investors from seeking equities. Despite rising global tensions, the economy proved resilient, corporate profits rose, and the once anticipated economic recession never materialized. New innovations and the growth of AI spurred technology stocks in 2024, with megacaps and artificial intelligence shares leading the charge. Foreign investment in U.S. securities reached a record high of over $30.0 trillion. Each of the benchmark indexes listed here closed 2024 much higher compared to 2023, with the NASDAQ, the S&P 500, and the Dow each hitting record highs. Stocks got an additional boost in September when the Federal Reserve began lowering its policy rate for the first time since 2020. The November election of former President Donald Trump also provided traders with guarded optimism that taxes will be lowered and less regulation will further spur corporate profits. In 2024, each of the 11 market sectors ended the year in the black. Information technology and communication services gained more than 40.0%, while shares in consumer discretionary and financials advanced more than 30.0%.
• Bonds: While growth in the stock market was fairly consistent this year, the same can’t be said for the bond market. Throughout most of 2024, U.S. bond yields fluctuated appreciably. Bond prices declined over the first four months of the year as bond yields rose. Global tensions and a shift in Federal Reserve policy influenced the bond market. By the end of 2024, over $600.0 billion was invested in the global bond market as investors locked in some of the highest yields in decades ahead of uncertainties likely in 2025. Ten-year Treasury yields rose higher until May, when they began trending downward, reaching a low mark in September. However, the results of November’s election pushed yields higher as investors anticipated proposed tariffs and tax cuts to increase government spending. Heading into the new year, bond investors will continue to assess the Federal Reserve’s implication that it is strongly considering a slowdown in the reduction of interest rates. The two-year Treasury note hovered around 4.36% at the end of 2024, which saw yields range from 3.51% to 5.05% during the year.
• Oil: Crude oil prices were heavily influenced by Chinese demand and tensions in the Middle East. West Texas Intermediate (WTI) crude oil prices began the year at about $80.00 per barrel, then rode a wave of volatility throughout 2024. After peaking at about $87.00 per barrel in early April, crude oil prices experienced a range of price swings, falling as low as $65.75 per barrel in September, to ultimately settle at around $71.00 per barrel by the end of December. Chinese demand underwhelmed for much of the year, despite several government-backed stimulus packages aimed at spurring the economy. Tensions in the Middle East escalated during the year, leading to fears of oil-supply disruptions. Heading into 2025, some forecasters expect the hands-off policies espoused by the new administration may lead to U.S. production growth.
• Prices at the pump trended higher during the first half of the year, then slid lower through December, largely responding to changes in global economics, supply and demand, and other extraordinary factors attributable to the unrest in the Middle East. The average retail price for a gallon of regular gasoline was $3.089 at the beginning of the year. By the end of June, the price had risen to $3.438 per gallon, then steadily declined for the remainder of the year to an average price of $3.024 on December 23.
• FOMC/interest rates: The target range for the federal funds rate began the year at 5.25%-5.50% following several interest rate increases by the Federal Open Market Committee (FOMC) in 2023. The Committee, in its battle to reduce inflation and maximize employment, did not adjust the federal funds rate during the first half of 2024, noting the uncertainty of the economy and ongoing risks of inflation. However, in September, the FOMC cut rates by 50.0 basis points and followed that reduction with two more 25.0-basis point reductions through December, lowering the federal funds rate by 100.0 basis points for the year. While price pressures have moderated since early 2022, the rate of inflation has remained stubbornly above the Fed’s 2.0% target, hovering between an annual rate of 2.4% (PCE price index) and 2.7% (CPI). The FOMC proffered a more cautious tone in predicting rate adjustments in 2025, projecting two 25.0-basis-point reductions.
• US Dollar-DXY: The U.S. Dollar Index had a solid year against a basket of currencies, rising from an initial value of about 102.20 to a tad over 108.00 by the end of December, hitting its highest level since 2022. During the first half of the year, rising prices and higher interest rates attracted investors seeking higher returns, increasing the demand for the dollar. When the Fed reduced interest rates, the dollar slid lower. The results of the presidential election drove the dollar higher following three months of weakening. Almost every major currency lost value against the dollar this year. The anticipated deregulation of business and tax cuts are expected to enhance the dollar’s value even further in 2025.
• Gold: Gold prices enjoyed noteworthy gains in 2024, moving from around $2,000 per ounce, to a peak of nearly $2,800 per ounce in November, before settling at around $2,600 per ounce by the end of the year. Gold reached a number record high prices throughout the year. Factors that helped gold prices advance in 2024 include several interest rate cuts, political instability in Eastern Europe, a conflict in the Middle East, and uncertainty in various foreign financial markets.

Last Month’s Economic News

• Employment: Job growth was stronger than expected in November, with the addition of 227,000 new jobs after adding only 36,000 new jobs in October. Monthly job growth has averaged 186,000 over the prior 12 months, compared with 255,000 per month in 2023. In November, the unemployment rate increased 0.1 percentage point to 4.2% and has remained in the range of 3.7%-4.3% for the year. The number of unemployed persons edged up 161,000 from October to 7.1 million. In November, the number of long-term unemployed (those jobless for 27 weeks or more) changed minimally at 1.7 million. These individuals accounted for 23.2% of all unemployed persons. The labor force participation rate inched down 0.1 percentage point to 62.5% in November (62.8% at the end of 2023). The employment-population ratio decreased 0.2 percentage point to 59.8% in November (60.4% in November 2023). In November, average hourly earnings increased by $0.13 to $35.61. Over the past 12 months ended in November, average hourly earnings rose by 4.0% (average hourly earnings were $34.23, up 4.1% in 2023). The average workweek increased by 0.1 hour to 34.3 hours in November, the same as in November 2023.
• There were 219,000 initial claims for unemployment insurance for the week ended December 21, 2024. During the same period, the total number of workers receiving unemployment insurance was 1,910,000. Over the course of the year, initial weekly claims gradually moved higher, peaking in November. A year ago, there were 213,000 initial claims, while the total number of workers receiving unemployment insurance was 1,817,000.
• FOMC/interest rates: As expected, the Federal Open Market Committee reduced the target range for the federal funds rate by 25.0 basis points to the current 4.25%-4.50% following its meeting in December. In arriving at its decision, the Committee noted that economic activity has moved at a solid pace and the labor market has generally eased, while the unemployment rate remained low. Inflation, while it had eased, remained somewhat elevated. As to future policy actions, the FOMC stated that “the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.” In addition, “the Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.” Projections for the federal funds rate indicate the possibility of two 25.0-basis-point rate decreases in 2025, fewer than previously anticipated.
• GDP/budget: The economy, as measured by gross domestic product, accelerated at an annualized rate of 3.1% in the third quarter, following increases of 1.6% in the first quarter and 3.0% in the second quarter. A year ago, GDP expanded at an annualized rate of 4.4% in the third quarter and 2.9% for 2023. Consumer spending, as measured by the personal consumption expenditures index, rose 3.7% in the third quarter, higher than in the second quarter (2.8%) and above the 2023 pace of 2.5%. Spending on services rose 2.8% in the third quarter, compared with a 2.7% increase in the second quarter. Consumer spending on goods increased 5.6% in the third quarter (3.0% in the second quarter). Fixed investment advanced 2.1% in the third quarter (2.3% in the second quarter). Nonresidential (business) fixed investment rose 4.0% in the third quarter, 0.1 percentage point above the rate in the second quarter. Residential fixed investment declined 4.3% in the third quarter following a 2.8% decrease in the second quarter. Exports rose 9.6% in the third quarter, compared with a 1.0% increase in the previous quarter. Imports, which are a negative in the calculation of GDP, advanced 10.7% in the third quarter after rising 7.6% in the second quarter. Consumer prices increased 1.5% in the third quarter (2.5% in the second quarter). Excluding food and energy, consumer prices advanced 2.2% in the third quarter (2.8% in the second quarter).
• November 2024 saw the federal budget deficit come in at $366.8 billion, up roughly $52.8 billion over the deficit from a year earlier. The deficit for the first two months of fiscal year 2025, at $624.2 billion, is $243.6 billion higher than the first two months of the previous fiscal year. For fiscal year 2024, which ended September 2024, the government deficit was $1.8 trillion, which was $137.6 billion above the government deficit for fiscal year 2023. For fiscal year 2024, government outlays increased $617.0 billion, while government receipts increased $480.0 billion. Individual income tax receipts rose by roughly $250.0 billion, and corporate income tax receipts increased by $110.0 billion.
• Inflation/consumer spending: According to the latest Personal Income and Outlays report, personal income and disposable personal income each rose 0.3% in November after both increased 0.7% in October. Consumer spending advanced 0.4% in November after increasing 0.3% the previous month. Consumer prices inched up 0.1% in November after being unchanged in October. Excluding food and energy (core prices), prices rose 0.1% in November, 0.2 percentage point less than the monthly increase in October. Consumer prices rose 2.4% since November 2023, while core prices increased 2.8%.
• The Consumer Price Index rose 0.3% in November after ticking up 0.2% in October. Over the 12 months ended in November, the CPI rose 2.7%, up from 2.6% in October. Excluding food and energy prices, the CPI rose 0.3% in November and 3.3% for the year ended in November, unchanged from the 12-month period ended in October. Costs for services remain elevated, despite a dip lower in November. Prices for both energy and food increased 0.2% in November. Prices for shelter rose 0.3% in November, accounting for nearly 40% of the overall monthly CPI advance. For the 12 months ended in November, energy prices decreased 3.2%, while food prices rose 2.4% and shelter prices advanced 4.7%. Gasoline prices dropped 8.1% over the last 12 months, while fuel oil prices fell 19.5%.
• Prices that producers received for goods and services advanced 0.4% in November following a 0.3% increase in October. Producer prices increased 3.0% for the 12 months ended in November, up from a 2.6% increase for the year ended in October. The November 12-month increase was the largest since the period ended February 2023. Producer prices less foods, energy, and trade services inched up 0.1% in November and 3.5% for the year, while prices excluding food and energy moved up 0.2% for the month and 3.4% for the 12 months ended in November. Producer prices for goods rose 0.7% in November and 1.1% for the year. Prices for services ticked up 0.2% in November, marking the fourth consecutive monthly advance. Prices for services rose 3.0% for the year ended in November.
• Housing: Sales of existing homes increased 4.8% in November and were up 6.1% from November 2023. The median existing-home price was $406,100 in November, lower than the October price of $406,800 but 4.7% higher than the November 2023 price of $387,800. Unsold inventory of existing homes represented a 3.8-month supply at the current sales pace, down from October (4.2 months) but above the 3.5-month supply in November 2023. Sales of existing single-family homes increased 5.0% in November. Over the 12 months ended in November, sales of existing single-family homes rose 7.4%. The median existing single-family home price was $410,900 in November, down from $411,700 in October but 4.8% above the November 2023 price of $392,200.
• New single-family home sales rose in November, however, sales prices have declined. In November, sales rose 5.9% and 8.7% for the year. The median sales price of new single-family houses sold in November was $402,600 ($425,600 in October), down from $429,600 a year earlier. The November average sales price was $484,800 ($525,400 in October), lower than the November 2023 price of $489,000. The inventory of new single-family homes for sale in November represented a supply of 8.9 months at the current sales pace.
• Manufacturing: Industrial production declined 0.1% in November following a 0.4% decrease in October. Manufacturing advanced 0.2% in November, driven higher by a 3.1% jump in motor vehicles and parts production. Mining decreased 0.9%, while utilities fell 1.3%. Over the past 12 months ended in November, total industrial production was 0.9% below its year-earlier reading. For the 12 months ended in November, manufacturing decreased 1.0%, utilities advanced 0.1%, while mining declined 1.3%.
• New orders for durable goods, down three of the last four months, decreased 1.1% in November. Durable goods orders rose 0.8% in October but fell 1.3% since November 2023. Excluding transportation, new orders decreased 0.1% in November. Excluding defense, new orders declined 0.3%. Transportation equipment, down three of the last four months, led the November decrease, falling 2.9%.
• Imports and exports: Import prices rose 0.1% for the second straight month in November, driven higher by advancing fuel prices. Import prices rose 1.3% from November 2023, the largest 12-month increase since the year ended July 2024. Import fuel prices advanced 1.0% in November following a 0.8% decline the previous month. Prices for nonfuel imports were unchanged in November after advancing 0.2% in each of the two previous months. Nonfuel import prices have not declined on a monthly basis since May 2024. Prices for exports were unchanged in November after increasing 1.0% in October. Higher nonagricultural prices in November offset lower agricultural prices. Export prices rose 0.8% over the past year, the largest 12-month advance since the 12-month period ended July 2024.
• The international trade in goods deficit was $102.9 billion in November, up $4.6 billion, or 4.7%, from October. Exports of goods were $176.4 billion in November, $7.4 billion more than October exports. Imports of goods were $279.2 billion in November, $12.0 billion more than October imports. Over the last 12 months, the goods deficit grew 16.1%. Exports rose 6.1% and imports increased 9.6%.
• The latest information on international trade in goods and services, released December 5, is for October and revealed that the goods and services trade deficit was $73.8 billion, a decrease of $10.0 billion, or 11.9%, from the September deficit. October exports were $265.7 billion, $4.3 billion, or 1.6% less than September exports. October imports were $339.6 billion, $14.3 billion, or 4.0% less than September imports. Year to date, the goods and services deficit increased $80.7 billion, or 12.3%, from the same period in 2023. Exports increased $94.0 billion, or 3.7%. Imports increased $174.7 billion, or 5.4%.
• International markets: World stocks are on pace for a second consecutive annual gain of 16%, despite tensions in the Middle East, the ongoing war in Ukraine, Germany’s underperforming economy amidst political upheaval, the downgrade of France’s credit rating, and China’s economic slowdown. For 2024, the STOXX Europe 600 Index rose 6.0%; the United Kingdom’s FTSE advanced 5.7%; Japan’s Nikkei 225 Index gained 10.2%; and China’s Shanghai Composite Index increased 12.7%.
• Consumer confidence: December saw consumer confidence wane, ending the year on a down note. The Conference Board Consumer Confidence Index® decreased in December to 104.7 following a 112.8 reading in November. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, fell 1.2 points to 140.2 in December. The Expectations Index, based on consumers’ short-term outlook for income, business, and labor market conditions, tumbled 12.6 points to 81.1 in December just above the threshold of 80.0 that usually signals a recession ahead.

Eye on the Year Ahead

Looking forward to 2025, several questions arise. The federal funds rate was reduced by 100 basis points in 2024. What impact will lower interest rates have on the economy, labor, and consumer prices? If the incoming administration moves toward deregulation, how will that affect the concentration of economic strength and will it promote more widespread income disparities? Will the conflicts in the Middle East continue into 2025, and if so, what impact will they have on crude oil production? Will increased import tariffs drive consumer prices higher and/or strengthen domestic businesses? These are just a few of the many issues to consider entering the new year.

The Markets (as of market close December 20, 2024)

Despite a late-week rally, stocks tumbled lower last week as Wall Street appears to be limping into the new year. Each of the benchmark indexes lost value, with the Russell 2000 falling nearly 4.5%. For much of the week, investors seemed to move from risk, particularly in light of the Federal Reserve’s revised projection of fewer interest rate reductions in 2025. The decline in equities was broad-based, with each of the market sectors ending the week in the red, with real estate, energy, and materials falling the furthest. Bond yields reached a near seven-month high. Crude oil prices declined on concerns over waning demand. The dollar reached a two-year high earlier in the week, while gold prices ended the week lower.

Wall Street saw the week before Christmas get off to a rousing start. Tech stocks boosted the market prior to the Federal Reserve’s upcoming meeting. The NASDAQ gained 1.2%, the Russell 2000 added 0.7%, and the S&P 500 climbed 0.4%. The Dow and the Global Dow each fell 0.3%. Yields on 10-year Treasuries slipped minimally to 4.39%. Crude oil prices fell 1.0% to settle at $70.58 per barrel. The dollar and gold prices declined 0.1% and 0.2%, respectively.

Stocks could not maintain the momentum garnered from the prior day as each of the benchmark indexes listed here lost value, led by the Russell 2000, which declined 1.2%. The Dow declined 0.6%, marking its ninth straight loss, which is its longest losing streak since 1978. The Global Dow fell 0.5%, while the S&P 500 and the NASDAQ dipped 0.4% and 0.3%, respectively. Ten-year Treasury yields remained at 4.39%. Crude oil prices fell to $70.20 per barrel. The dollar inched up 0.1%, while gold prices dropped 0.3%.

Stocks plunged last Wednesday as investor sentiment was dampened following news that the Federal Reserve projected fewer interest rate cuts in 2025 than previously suggested (see below). The Russell 2000 fell 4.4%, followed by the NASDAQ (-3.6%), the S&P 500 (-3.0%), the Dow (-2.6%), and the Global Dow (-2.1%). Ten-year Treasury yields gained nearly 11.0 basis points to reach 4.49%. Crude oil prices dipped to $70.00 per barrel. The dollar gained 1.0%, while gold prices declined 2.0%.

The Dow barely eked out a gain last Thursday to end its longest losing streak in 50 years. Stocks generally slid lower for the second straight session. The Global Dow declined 1.0% and the Russell 2000 lost 0.4%, while the S&P 500 and the NASDAQ each dipped 0.1%. Long-term bond values followed Wednesday’s decline by falling again on Thursday, lifting 10-year Treasury yields up 7.6 basis points to 4.57%. Crude oil prices slid 1.0%, settling at about $69.85 per barrel. The dollar advanced for the third consecutive day, while gold prices declined for the fourth day in a row.

Stocks bounced back last Friday as the latest inflation data came in slightly below expectations (see below). The Dow gained 1.2%, the S&P 500 rose 1.1%, the NASDAQ advanced 1.0%, and the Russell 2000 climbed 0.9%. The Global Dow advanced 0.6%. Ten-year Treasury yields fell 4.6 basis points. Crude oil prices ticked up 0.1%. The dollar fell 0.6%, while gold prices gained 1.3%.

Stock Market Indexes

Market/Index	2023 Close	Prior Week	As of 12/20	Weekly Change	YTD Change
DJIA	37,689.54	43,828.06	42,840.26	-2.25%	13.67%
Nasdaq	15,011.35	19,926.72	19,572.60	-1.78%	30.39%
S&P 500	4,769.83	6,051.09	5,930.85	-1.99%	24.34%
Russell 2000	2,027.07	2,346.90	2,242.37	-4.45%	10.62%
Global Dow	4,355.28	4,991.65	4,844.06	-2.96%	11.22%
fed. funds target rate	5.25%-5.50%	4.50%-4.75%	4.25%-4.50%	-25 bps	-100 bps
10-year Treasuries	3.86%	4.39%	4.52%	13 bps	66 bps
US Dollar-DXY	101.39	106.98	107.82	0.79%	6.34%
Crude Oil-CL=F	$71.30	$71.11	$69.49	-2.28%	-2.54%
Gold-GC=F	$2,072.50	$2,666.90	$2,641.80	-0.94%	27.47%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

• The Federal Reserve cut interest rates by 25.0 basis points, the third rate cut this year, while projecting two more rate cuts for 2025, which is fewer than previously indicated. In support of its decision, the Fed noted that the economy has expanded at a solid pace, labor conditions have eased, and inflation has progressed toward the Fed’s 2.0% target objective, although it remained somewhat elevated. According to Fed Chair Jerome Powell, the central bank may proceed at a slower pace, partly because it has already lowered rates substantially and also due to the uncertain path inflation may take, coupled with potential policy changes under President-elect Trump.
• The personal consumption expenditures (PCE) price index ticked up 0.1% in November following 0.2% increases in both September and October. Excluding food and energy, the PCE price index rose 0.1%. Since November 2023, prices rose 2.4%. Excluding food and energy, prices increased 2.8%. It appears that price volatility in food and energy costs is the primary contributor to the overall increase in consumer prices. Personal income and disposable (after-tax) personal income each rose 0.3% last month. Personal consumption expenditures, a measure of consumer spending, rose 0.4% in November.
• According to the third and final estimate, gross domestic product advanced 3.1% in the third quarter, 0.1 percentage point above the estimate for the second quarter. The increase in GDP primarily reflected increases in consumer spending (3.7%), exports (9.6%), nonresidential fixed investment (4.0%), and federal government spending (8.9%). Imports, which are a negative in the calculation of GDP, increased to 10.7%. The personal consumption expenditures (PCE) price index increased 1.5%, the same as previously estimated. Excluding food and energy prices, the PCE price index increased 2.2%. Gross domestic income (GDI) increased 2.1% in the third quarter, a downward revision of 0.1 percentage point from the previous estimate. The average of GDP and GDI, a supplemental measure of U.S. economic activity that equally weights GDP and GDI, increased 2.6% in the third quarter.
• Retail sales rose 0.7% in November and 3.8% over the last 12 months. Retail trade sales were up 0.9% last month and 4.1% from last year. The November increase in retail sales was largely attributable to a 2.6% advance in sales from motor vehicle & parts dealers and a 1.8% increase in nonstore (online) retail sales. Food & beverage store sales (including grocery store sales) declined 0.2% in November. For the year, nonstore retail sales rose 9.8%, motor vehicle & parts dealers sales increased 6.5%, sales from food & beverage stores advanced 1.8%, department store sales increased 1.4%, while gasoline station sales fell 3.9%.
• Industrial production moved down 0.1% in November after declining 0.4% in October. In November, manufacturing output rose 0.2%, boosted by a 3.5% increase in the index for motor vehicles and parts. The indexes for mining and utilities fell 0.9% and 1.3%, respectively. Total industrial production in November was 0.9% below its year-earlier level. Capacity utilization stepped down to 76.8% in November, a rate that is 2.9 percentage points below its long-run (1972-2023) average.
• The number of issued residential building permits rose 6.1% in November but were 0.2% below the November 2023 rate. Issued building permits for single-family homes ticked up 0.1% last month but were 2.7% under the estimate from a year earlier. Housing starts declined 1.8% in November and 14.6% below the November 2023 estimate. Single-family housing starts were 6.4% above the prior month’s total but 10.2% under the November 2023 figure. Housing completions in November were 1.9% below the October estimate but were 9.2% above the November 2023 rate. Single-family housing completions in November were 3.3% above the October rate and 7.0% above the estimate from a year ago.
• Existing home sales grew by 4.8% in November from the prior month. Over the last year, sales of existing homes rose 6.1%. Unsold inventory sat at a 3.8-month supply last month, down from 4.2 months in October but up from 3.5 months in November 2023. The median existing home price in November was $406,100, down marginally from the October estimate ($406,800) but up 4.7% from one year ago ($387,800). Single-family home sales increased 5.0% in November and 7.4% from November 2023. The median existing single-family home price was $410,900 in November, down from $411,700 in October but up 4.8% from November 2023 ($392,200). According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.6% as of December 12. That’s down from 6.69% one week ago and 6.95% one year ago.
• The national average retail price for regular gasoline was $3.016 per gallon on December 16, $0.008 per gallon above the prior week’s price but $0.037 per gallon less than a year ago. Also, as of December 16, the East Coast price ticked down $0.008 to $2.991 per gallon; the Midwest price increased $0.076 to $2.884 per gallon; the Gulf Coast price fell $0.041 to $2.562 per gallon; the Rocky Mountain price rose $0.053 to $2.839 per gallon; and the West Coast price decreased $0.042 to $3.785 per gallon.
• For the week ended December 14, there were 220,000 new claims for unemployment insurance, a decrease of 22,000 from the previous week’s level. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended December 7 was 1.2%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended December 7 was 1,874,000, a decrease of 5,000 from the previous week’s level, which was revised down by 7,000. States and territories with the highest insured unemployment rates for the week ended November 30 were New Jersey (2.5%), California (2.3%), Washington (2.2%), Alaska (2.1%), Minnesota (2.1%), Rhode Island (1.9%), Nevada (1.8%), Puerto Rico (1.8%), Illinois (1.7%), Massachusetts (1.7%), Montana (1.7%), New York (1.7%), Oregon (1.7%), and Pennsylvania (1.7%). The largest increases in initial claims for unemployment insurance for the week ended December 7 were in California (+14,411), Texas (+10,011), New York (+8,926), Illinois (+7,426), and Georgia (+6,119), while the largest decreases were in North Dakota (-788) and Delaware (-163).

Eye on the Week Ahead

There isn’t much in the way of important economic data during Christmas week, and trading customarily slows down. The report on the manufacture of durable goods for November is worth noting. New orders for durable goods are indicative of how busy factories will be in the coming months. In October, new orders rose 0.2%, driven mostly by a bump in transportation.