Stocks Remain Steady Amid Corporate Earnings and Inflation Concerns
This week, stocks showed little change as investors analyzed corporate earnings and a surprising jobs report, while inflation data will be closely watched with key reports upcoming.
Stocks ended the first week of February little changed as investors digested corporate earnings from Big Tech companies, a hotter-than-expected January jobs report, and continuing updates on President Trump's tariff policies.
For the week, the S&P 500 was roughly flat, while the Nasdaq Composite and Dow Jones Industrial Average fell about 0.4%.
In the week ahead, inflation will take center stage, with the Consumer Price Index (CPI) set for release on Wednesday morning. Updates on wholesale inflation and retail sales will also be closely tracked.
On the corporate front, 78 S&P 500 companies, including McDonald's, Coca-Cola, Super Micro Computer, and Airbnb, are set to report earnings.
The January jobs report released on Friday showed continued signs of resilience in the labor market as the unemployment rate unexpectedly fell, wages grew more than expected, and December's monthly job gains were revised higher to show the US labor market exited 2024 on an even better footing than previously reported.
This prompted economists to argue the Fed likely won't be cutting interest rates anytime soon. And if anything, it puts more pressure on inflation data to show cooling before the central bank brings down borrowing costs.
"The more recent data are indicative of a labor market that has regained its footing," Wells Fargo senior economist Sarah House wrote in a note on Friday. "This suggests that the tail risk of a sharp deterioration in the labor market has diminished, and as a result the FOMC can wait to see how the Q1 inflation data and economic policymaking play out before taking further action on the federal funds rate."
Stocks rebounded after dropping initially on Monday as President Trump's 25% tariffs on Mexico and Canada were delayed at least a month. But what exactly happens with tariffs remains an overhang on markets as investors debate the potential impact on inflation and, subsequently, monetary policy.
On Friday, Trump said he would announce a plan on reciprocal tariffs on American imports. The comments were made during a meeting with Japan's Prime Minister Shigeru Ishiba. Trump said tariffs on Japan were an option.
In a research note on Friday, BlackRock Global Fixed Income chief investment officer Rick Rieder said it would likely take two weak jobs reports to prompt discussion about the Fed resuming its interest rate cutting cycle. But he added that the risks surrounding Trump's policies, including tariffs and an immigration crackdown, muddle the outlook.
