Stocks ended the week modestly lower, pressured by a sharp Friday selloff tied to shifting expectations around future Federal Reserve policy. Markets reacted to news that Kevin Warsh has been nominated to succeed Jerome Powell as Fed Chair when Powell’s term ends on May 15. Warsh is widely viewed as more hawkish on inflation, prompting investors to reassess the likelihood of additional rate cuts later this year.
Small-cap stocks bore the brunt of the stock declines, with the Russell 2000 posting the week’s largest decline. Precious metals also fell sharply on Friday, reflecting concerns that a more inflation-focused Fed could keep interest rates higher for longer. Adding to the week’s activity, a heavy slate of corporate earnings—particularly from large technology companies—kept volatility elevated.
As expected, the Federal Reserve left its benchmark interest rate unchanged at 3.5%–3.75% following its Wednesday meeting. The Fed upgraded its outlook for economic growth and noted stabilization in the unemployment rate, while acknowledging that inflation remains somewhat elevated. Notably, two dissenting votes—both from Trump-appointed governors—favored another rate cut, highlighting growing divisions within the committee.
In Canada, the central bank also held rates steady, maintaining its benchmark interest rate at 2.25%.
Health-care stocks faced additional pressure after the Centers for Medicare & Medicaid Services (CMS) released its 2027 Advance Notice. Payments to Medicare Advantage and Part D plans are set to increase by just 0.09%, a near-flat adjustment that is likely to prompt insurers to reduce benefits, raise premiums, and adjust drug formularies to protect margins. CMS also proposed increasing the Part D out-of-pocket cap from $2,100 to $2,400. Insurer shares declined on the news, and significant lobbying activity is expected ahead of final rulemaking in March.
Treasury Yields
- 30-year Treasury: 4.884% (higher)
- 10-year Treasury: 4.252% (higher)
Mortgage Rates
- Average 30-year fixed (Freddie Mac): 6.10% (higher)
Commodities & Currency
- Crude oil: $65.69 per barrel (higher)
- Natural gas: $4.227 (sharply higher)
- U.S. dollar index: 96.80 (lower)
- Gold: $5,060.8 per ounce (higher)
- Silver $97.50 per ounce (sharply lower)
Commerce Department
Durable Goods (November) +5.3%, October revised -2.1%.
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Trade Deficit (November delayed) +94.6% from October
Wholesale Inventories (November, delayed)
Factory Orders (November, delayed) |
Labor Department
Producer Price Index (December – delayed)
- +0.5% up from +0.2% November and +0.1% October
- Excluding volatile food and energy +0.4%
- Goods – Unchanged
- Services +0.7%
- Year over year +3.5%
- Excluding volatile food and energy +3.6%
- Excluding volatile food and energy +3.6%
Jobless Claims (prior week)
- New Claims 209,000 (lower from revised level)
- 4-week Moving Average 206,250 (higher)
- Total Claims 1,827,000 (lower)
Energy & Industry Data
Energy Information Administration
- Weekly Oil Production 13.696 million barrels (decrease)
- Natural Gas Storage -242 billion CuFt > highest level for this time of year in the past 5 years.
Baker Hughes Rig Count
- Oil rigs: unchanged at 411
- Gas rigs: +3 to 125
Q4 Corporate Earnings
- With 33% of S&P 500 companies reporting the blended earnings growth rate year over year is 11.9%.
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Loren Rex – Emeritus
Erik A Smith, AIF® – President & C.E.O.
Nicholas Acri, CFP® – Partner & Wealth Advisor
Dylan Thomas, CFP® – Partner & Wealth Advisor
Jack Zeeb – Wealth Advisor
These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. The Indices mentioned are unmanaged and cannot be invested into directly. The Dow Jones Industrial Average, Dow Jones, or simply the Dow, is a stock market index of 30 prominent companies listed on stock exchanges in the United States. The DJIA is one of the oldest and most commonly followed equity indexes. The Nasdaq Composite is a stock market index that includes almost all stocks listed on the Nasdaq stock exchange (more than 2500 stocks).
Sources:
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCRFPUS2&f=W
https://ir.eia.gov/ngs/ngs.html
https://www.freddiemac.com/pmms
https://www.wsj.com/market-data?mod=nav_top_subsection
https://bakerhughesrigcount.gcs-web.com/na-rig-count
