Financial Update: Week of December 30, 2024
Since we are in the last trading week and days of 2024, now is a good time to keep you updated on the latest developments.
Overall, major U.S. equity indexes traded quietly during the previous holiday-shortened week, but there was some Friday drama for the market lovers out there.
Tallying the week, the S&P 500 rose by 0.67%, the Nasdaq 100 was higher by 0.86%, and the Dow Jones Industrial Average increased by 0.35%.
Mixed Weekly Employment Picture
Last week’s economic calendar was lighter than usual, so there were extra eyes on the weekly unemployment number. The weekly employment data for initial jobless claims came in slightly better than expectations, with 219,000 seasonally adjusted initial claims filed versus Reuters economists’ forecasts for 224,000.
That’s 1,000 fewer initial jobless claims than the week before. That’s the good. A difference of 1,000 claims from the prior week indicates a slightly cooling yet still healthy labor market week over week, which could contribute to the Fed leaving interest rates unchanged in the near future.
However, a deeper look revealed that continuing claims rose to the highest level since 2021. That’s the not-so-good.
It’s worth keeping in mind that the weekly jobless data is not as impactful as the monthly payroll data, but since economic data releases were light last week, it played into things.
Treasury Yields Rise (Again)
The 10-year yield settled firmly above the 4.50% level last week in an otherwise quiet week for U.S. financial markets. What this means is that bonds were sold by some folks, seemingly a continuation of the narrative of a less rate-cut-friendly Fed to come in 2025.
In fact, the 10-year note yield rose last week to its highest levels since May 2024, settling the week near 4.62%, tacking on nearly 9.5 basis points on the week. This is tough news for prospective mortgage borrowers who may be forced to make quick decisions. (Remember, mortgage rates tend to rise and fall along with bond yields.)
How high will we go? The cycle high that we saw in the 10-year yield during the Fed’s rate hike campaign was just about 5%. Don’t look now, but that is not too far away!
Interest Rate Expectations
The first Federal Reserve meeting of 2025 is set for January 29th. As of market close on 12/27, there was an overwhelming 89.3% likelihood that interest rates would remain unchanged, according to the CME FedWatch Tool.
So, the interest rate outlook for 2025 is different now than just a month or two ago. Could expectations of sticky, “high” interest rates be close to being priced into markets yet? More time is needed to find out.
Some inflation prints to the downside would surely help. We get our next look at Consumer Price Index (CPI) data on January 15th, five days after December payrolls drop on January 10th. Both are sure to be heavily scrutinized given the Fed’s recent change in tone surrounding future monetary policy direction.
Santa Claus Rally — Not Last Friday!
On Monday morning, with two trading days in the books after Christmas, Santa had yet to visit Wall Street — or at least he wasn’t seen on trading floors and screens last Friday!
While Thursday, December 26th, was an up day for the S&P 500, Friday gave us rather illiquid conditions, as year-end profit-taking was deemed the rationale for the selling, with the CBOE Volatility Index ($VIX) moving higher.
Many market participants are on vacation, so larger-than-usual price swings in either direction can be expected. The $VIX rose along with the 10-year yield last Friday, while major stock indexes and gold traded lower.
Friday $VIX Rise
Could the $VIX’s rise be a harbinger of things to come or nothing more than a post-holiday trade session with few participants? We will get a better picture of the mood of the markets when liquidity returns to a more normal state after the New Year’s Day holiday.
Treasury yields trading higher again last week will be on the minds of traders and investors this week as we sprint to the end of the fiscal year.
OpenAI For-Profit
OpenAI laid out its for-profit plan last week, with plans for its for-profit division to become a Public Benefit Corporation (PBC) in 2025 with “ordinary shares of stock.” The announcement was released on the OpenAI blog before being analyzed elsewhere online.
By transforming into a Delaware PBC “with ordinary shares of stock,” OpenAI says it can pursue commercial operations, while separately hiring a staff for its nonprofit arm and allowing that wing to take on charitable activities in health care, education, and science.
The nonprofit will have a “significant interest” in the PBC “at a fair valuation determined by independent financial advisors,” OpenAI wrote.
The move has been in rumor land for months, and we now have some confirmation. Financial market professionals will be paying big attention to the ongoing developments at OpenAI.
Time to Turn the Page
Get ready to flip your calendar if you haven’t already as we wait to see what 2025 has in store! At the time of writing, the final data for 2024 is not yet available since there are still two more trading days left in the year. However, major U.S. stock indexes are on track for another impressive year.
As always, we will stay focused on the principles that got us to where we are today. These principles include diversification, asset allocation based on multiple factors, and staying disciplined during all market cycles while sticking with the plan.
If you have any thoughts about stocks, interest rates, dividends, or anything else, feel free to reach out to me. We can connect, discuss, and exchange ideas. I am always here as a resource for you!
Disclosure:
This material provided by Levitate. Levitate is not affiliated with Valmark Securities, Inc. and Valmark Advisers, Inc. Indices are unmanaged and do not incur fees, one cannot directly invest in an index. Diversification does not guarantee investment returns and does not eliminate the risk of loss. Past performance does not guarantee future results. The information provided has been derived from sources believe to be reliable, but is not guaranteed as to accuracy and does not purport to be complete analysis of the material discussed, nor does is constitute an offer or a solicitation of an offer to buy any securities, products or services mentioned.
Disclosure:
This material provided by Levitate. Levitate is not affiliated with Valmark Securities, Inc. and Valmark Advisers, Inc. Indices are unmanaged and do not incur fees, one cannot directly invest in an index. Diversification does not guarantee investment returns and does not eliminate the risk of loss. Past performance does not guarantee future results. The information provided has been derived from sources believe to be reliable, but is not guaranteed as to accuracy and does not purport to be complete analysis of the material discussed, nor does is constitute an offer or a solicitation of an offer to buy any securities, products or services mentioned.