In last week’s newsletter, we said that we were facing down a ‘High Stakes’ trading week, packed full of big earnings and significant inflation reports. This certainly played out and fortunately for investors, many of the major Financial earnings reports delivered strong results, but, most importantly, the CPI & PPI inflation prints from last week each produced positive surprises. Each report showed that inflation in the month of December had increased at a slower rate than was expected. Each of these data points provided some much needed relief for stocks which had been under immense pressure from sky-rocketing long term treasury yields. Last week began with the 10-Year U.S. treasury yield reaching 4.8% until this fresh inflation data was released. These new datapoints broke the fever in the furious yield rise, and we saw the 10-Year yield end the week nearly 20 basis points lower at 4.62%. Long-term treasury yield will continue to be an important theme to watch in the near term, but for now, stocks have been provided with some relief. With the flood of positive news and data last week, stocks were able to stage a dramatic turnaround and end the week with all three major averages well in the green by at least 2.4% or more. Leading into last week, the S&P 500 had declined in consecutive weeks and in 4 of the previous 5. But at market close on Friday, the S&P edged out a gain of nearly 3% on the week which erased much of the previous few week’s decline. This boost in the S&P saw the index intra-day regain the 6000 level, which is technically significant. Looking toward the market internals, we did see a strong weekly performance on the NYSE Advance Decline index which reversed trend and set a new short-term high. Additionally, the Equal Weighted S&P 500 index displayed good strength as it rallied nearly 4% on the week. Each of these signifies broad strength and participation to the upside across the market. Finally, at market close on Friday, now 58% of S&P 500 stocks are trading above their 200-Day moving average. This is a marked increase from the previous week, which is a strong bullish sign for the market. This perhaps could indicate an end to the recent selling and a return to a ‘risk on’ trading sentiment from investors.

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Key Events to Watch this Week

  • Inauguration, Early policy clarity
  • Final Consumer Sentiment read
  • More 4th Quarter Earnings

Following last week’s bevy of economic data, this week will have a bit more tame approach regarding the economic reports. The main data point of consequence that investors will be weighing this week will be the final read on Consumer Sentiment for the month of January which will be delivered on Friday morning. Now, the upcoming week will be our third shortened trading week thus far in 2025 as markets will be closed on Monday in observance of Martin Luther King, Jr. Day. Despite it being a holiday and the markets being closed, this does not mean Monday will be an inconsequential day for investors and stocks. Also, coinciding on Monday, will be the inauguration marking the official change in Presidential Administrations. This is not highlighted for political purposes, but rather, as has become the norm, it is expected that there will be a great deal of executive actions taken on this day. From the investor’s perspective, one recent unknown has been exactly what actions will be taken in the first few days of the new administration, so being provided with some clarity on this item should assuage some uncertainty for markets. The most important thing that our team is going to be monitoring in the coming week is earnings! Earnings over time ultimately will determine the direction of markets, so watching to see the latest Q4 results come in is crucial. Q4 earnings thus far have been strong as many of the major Financials delivered impressive results and investors are hoping this is the beginning of a trend that will continue throughout the remainder of the reporting season. A few specific names that we are watching this week are Netflix, Inc., Proctor & Gamble Co., & American Express Co. NFLX is set to report following the close on Tuesday and analysts expect them to post a 98.7% YoY increase in Q4 EPS. Additionally, PG & AXP are on deck to report on Wednesday & Friday respectively.

Thank you for reading this week’s edition of the Weekly Market Periscope Newsletter, I hope you enjoyed it. Please lookout out for the next edition of the newsletter as we will give you a preview of the upcoming week’s important market events.

Thanks,

Blane Markham

Author, Weekly Market Periscope

Hughes Optioneering Team

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