The U.S. stock markets concluded the week with a positive note, ending sharply higher after a choppy session on Friday. This marks the first close in positive territory for Wall Street in 2025.
Market Participants Eyeing Trump’s Economic Policies and Fed Rate Decisions
Market participants will closely monitor the economic policies of the newly-elected Trump administration, as well as interest rate-related decisions by the Federal Reserve (Fed). The three major stock indexes ended in the green on Friday. However, these indexes finished in negative territory for the last truncated week.
How Did the Benchmarks Perform?
Dow Jones Industrial Average (DJI)
- Gained 0.8% or 339.86 points to close at 42,732.13
- Terminated an eight-day losing streak
- 24 components of the 30-stock index ended in positive territory while 4 were in negative zone
Nasdaq Composite
- Finished at 19,621.68, advancing 1.8% or 340.88 points due to strong performance by technology behemoths
- Terminated a five-day losing streak
S&P 500
- Appreciated 1.3% to finish at 5,942.47
- Nine out of 11 broad sectors of the broad-market index ended in positive territory and two in negative zone
- The Consumer Discretionary Select Sector SPDR (XLY), the Technology Select Sector SPDR (XLK), the Health Care Select Sector (XLV), the Industrials Select Sector SPDR (XLI), the Real Estate Select Sector SPDR (XLRE) and the Utilities Sector SPDR (XLU) rose 2%, 1.6%, 1%, 1.1%, 1.4% and 1.1%, respectively
CBOE Volatility Index (VIX)
- Down 10% to 16.13
- A total of 14.09 billion shares were traded on Friday, lower than the last 20-session average of 14.91 billion
- Advancers outnumbered decliners on the NYSE by a 3.03-to-1 ratio. On Nasdaq, a 2.69-to-1 ratio favored advancing issues
Trump’s Policies: A Mixed Bag
Market participants are uncertain regarding Donald Trump’s economic policies. Trump’s popular policies like reducing corporate tax, deregulation and imposing tariffs on foreign products are expected to boost economic growth, especially for domestic industries. However, these policies may lead to a higher inflation rate, making it harder for the Fed’s goal of a soft landing of the economy.
Fed’s Interest Rate Cut: A Source of Uncertainty
Market participants remain uncertain regarding the Fed’s interest rate cut in 2025. The central bank has reduced the benchmark lending rate by 1% in the last three FOMC meetings of this year. The Fed fund rate is currently in the range of 4.25-4.5%. In December, the Fed’s latest ‘dot-plot’ showed just two rate cuts of 25 basis points in 2025 instead of four indicated in September.
Economic Data: A Mixed Picture
The Institute of Supply Management reported that the manufacturing PMI (purchasing managers’ index) for December came in at 49.3, beating the consensus mark of 48. The metric for November was 48.4. However, economic activity in the manufacturing sector contracted in December for the ninth consecutive month and the 25th time in the last 26 months. Any reading below 50 indicates contraction of manufacturing activities.
Weekly Roundup: A Disappointing Week
The truncated last week, which marked the end of 2024 and the beginning of 2025, was a disappointing one for Wall Street. The Dow, the S&P 500 and the Nasdaq Composite fell 0.6%, 0.5% and 0.5%, respectively. Investors remained concerned about highly overvalued U.S. stocks following an impressive bull run of the last two years.
What’s Next?
Market participants will closely monitor Trump’s economic policies, as well as interest rate decisions by the Fed. The three major stock indexes ended in positive territory on Friday, but investors remain cautious due to the uncertain market environment.
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This article is for informational purposes only and should not be considered as investment advice. It’s essential to do your own research and consult with a financial advisor before making any investment decisions.
References
- Zacks Investment Research. (2023). U.S. Stock Markets End Sharply Higher After Choppy Session.
- Institute of Supply Management. (2023). Manufacturing PMI for December 2024.
- Federal Reserve. (2023). Fed Fund Rate.
This article is subject to change and may not reflect the most up-to-date information. Always verify the accuracy of the data and consult with a financial advisor before making any investment decisions.
