Markets Wobble Into 2025: Is The Party Over Or Just Getting Started?
The market looks and feels very tired. The last three trading days of 2024 were weak, and it has carried over into 2025. The market is under a bit of pressure this morning, as the 10-year treasury pushed up to 4.77% and continues to move higher. The dollar is also getting stronger, adding additional pressure to equities, and you can see that in the selloff today. The S&P 500 broke through an HCM Pivot Point®, signaling there may be more downside as the market tries to find support. The HCM-BuyLine® is still positive, and the trend is still up, but in the short-term it looks like the market is going to consolidate a bit lower. The chart of the 7–10-year treasuries ETF (IEF) just about says it all: as rates have risen the value of bonds has fallen.
Tougher comps, elevated estimates, and lower beat rates imply a tougher earnings environment in 2025. The Q4 earnings season starts in earnest next week when several big banks report. This could be the most consequential earnings season in over a year, and this earnings environment is likely to be the toughest in three years.
O’Reilly Auto parts has pulled back a bit but is a good solid company that tends to hold up well during pullbacks. Good times or bad, auto parts are always needed. Salesforce (CRM) has pulled back and looks attractive, great company, solid earnings and CRM should benefit from AI.
We started the year off liking the banking sector, but that might change as the wildfires in California will put pressure on banks like Wells Fargo and Bank of America, as they will have a lot of mortgage defaults to deal with.
The surprising 256,000 increase in new jobs in December and a declining unemployment rate is good news, but the latest employment reports masks recent softness in the labor market. The increase in new jobs in December, for example, was centered on just four industries: Health care, government, retail and leisure and hospitality. In other words, most industries are hiring relatively few people. Every major survey of consumers and businesses shows a sharp decline in job openings over the past year and a slower rate of hiring. The Labor market is still pretty solid, to be sure, but not as rosy as the December report indicates.
