March 3, 2025
The Markets (as of market close February 28, 2025)
The latest data showed inflation remained elevated. The personal consumption expenditures (PCE) price index has risen from a low of 2.1% for the 12 months ended in September to 2.5% for the same period ended in January, which supports the Federal Open Market Committee's assessment that inflation "remains somewhat elevated." Another potential inflationary risk is the impact of looming tariffs threatened by the White House, which gives the Fed ample justification to hold interest rates steady over the next few months.
Growth of the U.S. economy continued at a modest pace. The gross domestic product (GDP) rose 2.3% in the fourth quarter following a 3.1% increase in the third quarter. For 2024, GDP rose 2.8%, 0.1 percentage point less than the 2023 rate. In the fourth quarter, personal consumption expenditures, the largest contributor in the calculation of GDP, rose 4.2% in January. Spending rose 12.1% on durable goods, possibly reflecting consumers' concerns about future prices and availability of big-ticket imports such as motor vehicles. Spending on nondurables increased 3%, while consumer spending on services advanced 3.3%. For 2024, consumer spending rose 2.8%.
Job growth rose by 143,000 in January after averaging a monthly gain of 186,000 in 2024. The unemployment rate remained steady at 4%. Wages rose 4.1% over the past 12 months. The number of job openings fell by 556,000 in December (latest information available) to 7.6 million (8.1 million jobs in November), which was below expectations. Job openings were down 548,000 in the private sector and 9,000 in government. However, this data does not reflect the layoffs and cuts sanctioned by the Trump administration. The latest unemployment data showed total claims paid at the end of January increased from a year earlier.
According to FactSet, the S&P 500 reported earnings growth of 17.8% in the fourth quarter, the highest growth since the fourth quarter of 2021. However, during earnings conference calls, 221 of the S&P 500 companies mentioned "tariffs." The financial sector reported the highest fourth-quarter earnings growth at 56.9%. Of the S&P 500 companies reporting earnings, 77% exceeded earnings per share above expectations, equal to the five-year average. However, 72 S&P 500 companies reported a decline in earnings per share.
The real estate sector saw residential sales decline in January. Mortgage rates decreased somewhat but remained elevated. According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.76% as of February 27. That's down from 6.95% one month ago and lower than 6.94% a year ago.
Industrial production expanded for the third consecutive month in January, although manufacturing output slid marginally. Last month saw mining decrease, while utilities increased. Over the last 12 months, industrial production, manufacturing, mining, and utilities increased. Purchasing managers reported manufacturing expanded in January as new orders and output increased. The services sector saw growth continue in January but at a slightly slower pace than in December.
Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark the performance of specific investments.
Looking ahead
Looking ahead to March, investors will pay particular attention to inflation data as February brought increased concerns that price pressures may be on the rise again.
Data sources: Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Department of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI, Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). News items are based on reports from multiple commonly available international news sources (i.e., wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Forecasts are based on current conditions, subject to change, and may not come to pass. U.S. Treasury securities are guaranteed by the federal government as to the timely payment of principal and interest. The principal value of Treasury securities and other bonds fluctuates with market conditions. Bonds are subject to inflation, interest-rate, and credit risks. As interest rates rise, bond prices typically fall. A bond sold or redeemed prior to maturity may be subject to loss. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.
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