Stocks up and yields down as US inflation cools

Macroeconomic/ geopolitical developments

• U.S. and global stocks rallied last week amid easing inflation and falling Treasury yields, with major indexes posting strong gains while bond markets stabilized, supporting optimism for economic progress and potential rate cuts.
• December’s CPI data showed headline inflation rising to 2.9% year-over-year due to energy costs, while core inflation eased to 3.2%, marking progress in the Federal Reserve’s efforts to tame price pressures despite ongoing challenges in reaching its 2% target.

• Major U.S. banks exceeded expectations in their latest earnings reports, with surging profits, robust trading revenues, and positive market sentiment highlighting the financial sector’s resilience and strong year-over-year growth.

• On Monday, January 20, markets will close for Martin Luther King Jr. Day, coinciding with President-elect Donald Trump’s second-term inauguration.

• Netflix is set to release its fourth-quarter earnings Tuesday, with analysts expecting strong revenue and earnings growth, while global flash PMI data on Friday will provide insights into early 2025 economic trends across major regions.

Global financial market developments

• US and global equity averages extended higher
• US and European bond moved to lower yields on the week
• The US Dollar Index corrected lower from a multi-year high, then bounced.
• Gold futures rallied, to the top of a multi-week range.
• Oil futures rallied to a multi-month high.

Key this week

Geopolitical Watch: Monday, January 20, marks the federal holiday honoring Rev. Martin Luther King Jr., with US equity, bond and futures markets closed or having altered hours. Monday also sees the inauguration of President-elect Donald Trump.

Central Bank Watch: The main central bank activities this week are PBoC Interest Rate Decision on Monday and BoJ Interest Rate Decision and Monetary Policy Statement on Friday.

Macro Data Watch: The main macroeconomic data this week are the Global Flash PMI releases on Friday. Some other data points of note are the Canadian and Japanese CPI on Tuesday and Friday respectively.

Earnings Watch: The main US Q4 earnings release this week is Netflix on Tuesday.We also get P&G and J&J on Wednesday, Texas Instruments and GE Thursday, then Verizon on Friday.

See data tables on next page

Steve Miley (The Market Chartist)

Editor in chief

Steve Miley is the Market Chartist and has 32 years of financial market experience and as a seasoned expert now has many responsibilities. He is the founder, Director and Primary Analyst at The Mar... Continued