Are stocks showing signs of exhaustion?

DJIA 52-wk: +14.56% YTD: +4.13% Wkly: -054%

S&P 500 52-wk: +19.88% YTD: +2.45% Wkly: -0.24%

NASDAQ 52-wk: +22.09% YTD: +1.10% Wkly: -0.53%

Roundhill MAG 7 ETF: 52-wk: +44.44% YTD: -0.20% Wkly: -2.41%

During the week of February 3 to February 7, 2025, U.S. stock markets experienced notable volatility influenced by trade policy developments, corporate earnings reports, and economic data releases.

Market Performance:

S&P 500: The index declined by 0.2% over the week. ullandinvestment.com

Dow Jones Industrial Average: The Dow decreased by 0.5%. apnews.com

Nasdaq Composite: The tech-heavy Nasdaq also fell by 0.5%. apnews.com

Key Influencing Factors:

Trade Policy Uncertainty: The announcement of new tariffs by President Donald Trump, including a 25% tariff on Canadian and Mexican goods and a 10% tariff on Chinese imports, heightened market volatility. While tariffs on Canada and Mexico were delayed by a month, the 10% tariff on Chinese goods proceeded as planned. nasdaq.com

Amazon: Despite reporting earnings that surpassed expectations, Amazon's stock declined by 4.1% due to concerns over increased capital expenditure forecasts. marketwatch.com

Alphabet (Google): Similarly, Alphabet faced stock declines despite strong earnings, attributed to high capital spending forecasts. investors.com

Palantir: The company saw a significant stock surge following robust earnings reports. investors.com

Economic Data:

Employment Report: The Labor Department's January report revealed that employers added fewer jobs than anticipated, though the unemployment rate unexpectedly decreased to 4.0%. investopedia.com

Consumer Sentiment: A notable decline in consumer sentiment was observed, contributing to market unease. investopedia.com

Overall, the interplay of trade uncertainties, mixed corporate earnings, and economic indicators contributed to a turbulent week for U.S. financial markets.

Scott Wren, senior global market strategist at Wells Fargo Investment Institute, stated that the jobs report did nothing to change his forecast for the Fed to cut the federal funds rate just once in 2025. This is more conservative than many traders on WLL Street, who collectively see a 45 % chance the Fed will cut rates at least twice, according to data from CME Group.

Rapid-Fire News Events. Don’t Let It Make Your Head Spin:

The outlook for stocks changes almost every day in Trump World, and sometimes it changes in a matter of hours. So far, that hasn’t been a recipe for success in the stock market, which is up less than 2% from where it was the day after Donald Trump won the election.

Going nowhere seems to be a running theme. The S&P 500 index SPX -0.95% dipped 0.2% this past week, while the Dow Jones Industrial Average DJIA -0.99% and the Nasdaq Composite COMP -1.36% both fell 0.5%.

The market seemed unaffected by some of the most newsworthy announcements from the new administration, including the dismantling of the U.S. Agency for International Development, and Trump’s plan for the U.S. to occupy and rebuild Gaza. But tariff news definitely shook investors.

The week started with tariff threats against Canada and Mexico and ended with the president promising reciprocal tariffs this coming week against countries that impose levies on U.S. goods. Both news events caused stocks to drop—though they rebounded this past Monday after the Canadian and Mexican tariffs were delayed.

“Headline whipsaws have become commonplace since the start of the year, and are a growing danger for investors,” writes Mike O’Rourke, chief market strategist at JonesTrading. Investors are getting “chopped up by chasing headlines.”

O’Rourke thinks it often makes sense for investors to “fade” breaking news, instead of trying to navigate it as it unfolds. Ignoring Trump’s early moves is also an option. But the news outside of the administration isn’t particularly bullish right now either.

In between the tariff talk, corporate and economic news was mostly downbeat: Amazon.com and Alphabet GOOGL -3.27% announced disappointing guidance, and monthly jobs numbers came in slightly weaker than expected.

The jobs report showed that wages are rising faster than analysts had expected. That’s a good thing for the overall economy and may reflect the fact that 21 states boosted their minimum wage at the start of the year, impacting 9 million people, according to Bankrate. But it could be a bad thing for inflation. The bond market appears to be pricing in more inflation ahead. The yield on the 10-year Treasury note was back up to 4.5% on Friday, after falling to 4.4% on Wednesday.

Rising rates could throttle interest-rate sensitive areas of the economy like the housing market, which helps explain why the SPDR S&P Homebuilders XHB-2.47% exchange-traded fund is down 8% since the election.

What’s more, given the news, the Federal Reserve is increasingly unlikely to lower interest rates soon. “Either way you spin it, the Fed should feel quite cozy sitting tight the rest of winter,” wrote Charlie Ripley, senior investment strategist at Allianz Investment Management.

Just don’t expect investors to feel the same way.

The jobs report showed that wages are rising faster than analysts had expected. That’s a good thing for the overall economy and may reflect the fact that 21 states boosted their minimum wage at the start of the year, impacting nine million people, according to Bank rate. But it could be a bad thing for inflation. The bond market appears to be pricing in more inflation ahead. The yield on the 10-year Treasury note was back up to 4.5% on Friday, after falling to 4.4% on Wednesday.

Rising rates could throttle interest-rate sensitive areas of the economy like the housing market, which helps explain why the SPDR S&P Homebuilders ETF is down 8% since the election. Fewer interest rate cuts by the Fed could help keep mortgage rates high.

What’s more, given the news, the Fed is increasingly unlikely to lower interest rates soon. “Either way you spin it, the Fed should feel quite cozy sitting tight the rest of winter,” wrote Charlie Ripley, senior investment strategist at Allianz Investment Management.

1) About 310 S&P 500 have reported 4th quarter earnings so far, with nearly 80% beating earnings-per-share estimates and 20% missing. I’ll be paying close attention to that because a lot of the beats resulted in the stocks going down.

2) CPI is due to be released on Wednesday.

3) Retail sales on Friday.

4) How Mag 7 & Semi stocks act

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DATA: Barron’s print edition page 26 2/10/25 Market Week Avi Salzman

Paragraph: one ChatGPT market recap for the week of 2/3/25-2/3/25 As stated above

Paragraph: two NYT print edition 2/8/25 page B2 Stocks & Bonds The AP

Paragraph: three Barron’s print edition page 27 The Trader Avi Salzman

Paragraph: four Barron’s online edition 2/7/25 Rapid Fire News Avi Salzman

Paragraph: five Closing remarks Richie Naso opinion