Wall Street Bulls Gets Some Rate Cut Mojo Back as S&P 500 Has Best Week in Months

The S&P 500 (Index: SPX) had its best trading week since the 2024 elections. The index closed up 2.9% to end the week at 5,996.66.

The index had its best day on Wednesday, 15 January 2025 thanks to a better-than-expected consumer price inflation report. Although headline inflation ran hot, thanks largely to food prices, which are showing the effects of a reduced supply of eggs because of bird flu. Less volatile components of the Consumer Price Index were muted however, which firmed the odds for at least one rate cut during 2025 and raised the potential for additional rate cuts.

After the tamer than expected inflation data, the CME Group’s FedWatch Tool gives much stronger odds of the Fed acting to cut interest rates by a quarter point on 18 June (2025-Q2). Meanwhile, the probability of another rate cut later in the year also rose, but as yet remain below 50%, with December 2025 coming the closest to that threshold.

That’s a significant development because the latest update of the alternative future chart shows investors shifting their forward-looking attention toward the distant future quarter of 2025-Q4.

Here’s the full rundown of the trading week’s market moving headlines:

Monday, 13 January 2025

• Signs and portents for the U.S. economy:

• Oil prices climb 2% to 4-month high with sanctions expected to disrupt Russian supplies
• US bank profits likely boosted by higher deal fees, trading
• LA blaze damage likely to be largest wildfire insured loss in US history

• Biggest US banks ready mortgage relief for victims of Los Angeles wildfires

Bigger bailouts, mixed economic signs developing in China:

• China flags more policy measures to bolster yuan
• China exports accelerate amid trade tensions, imports surprise
• China vehicle export growth to slow in 2025, association data shows

Bigger trouble developing in the Eurozone, ECB minions worry about keeping Eurozone interest rates too high:

• German premium carmakers’ sales battered in China and Germany amid slowdown
• ECB’s chief economist warns of too-low inflation if rates stay high

Dow, S&P, Nasdaq ended trading mixed ahead of inflation and earnings figures

• Nasdaq closes lower, S&P 500 up slightly as US yields stay elevated

Tuesday, 14 January 2025

• Signs and portents for the U.S. economy:

• US small business confidence jumps to more than six-year high
• Oil prices slip on US energy demand forecast

• EIA expects oil prices to be under pressure from oversupply in 2025, 2026
• Oil shipping rates surge after US sanctions hit availability

US inflation still slowing as producer prices rise below expectations in December

BOJ minions thinking about maybe hiking rates, mixed economic signs developing in Japan:

• BOJ deputy governor flags chance of rate hike next week
• Japan’s service mood improves, rising costs cloud outlook
• Japanese investors exit foreign assets for third straight month in Dec

ECB minions thinking they can’t lower Eurozone interest rates faster:

• ECB cannot lower rates too quickly, Holzmann says

S&P, Nasdaq, Dow finish mixed after cooler producer inflation data

• S&P 500 edges higher, Nasdaq dips in choppy session as inflation data eyed

Wednesday, 15 January 2025

• Signs and portents for the U.S. economy:

• US consumer prices post largest gain in nine months; underlying inflation slowing

• Cooler core inflation revives bets on Fed rate cuts
• Instant view: Dec CPI rises a touch above expectations, keeps Fed on track

US 30-year mortgage rate tops 7%, highest since May 2024

US importers rush in goods from China as Trump tariff threat looms

Oil gains capped by uncertainty over sanctions impact

Fed minions say they’re uncertain on direction of economy, but claim they’re beating inflation:

• Fed’s Williams says policy data dependent in very uncertain environment
• Fed’s Barkin says latest CPI data shows price pressures continue to ease

BOJ minions say they could hike rates as soon as next week, long-running problem for Japan’s economy to get worse:

• BOJ chief Ueda signals rate hike chance next week, yen jumps
• Japan firms face serious labour crunch from aging population, survey shows

Bigger trouble developing in Eurozone, ECB minions thinking about more rate cuts:

• German economy shrinks for second consecutive year

• Euro zone’s depressed industry records small rebound in November

ECB to cut rates four more times by mid-year, say economists – Reuters poll

• ECB must be prudent with rate cuts given high uncertainty, officials say
• ECB’s Centeno sees interest rates falling to about 2% as inflation under control

Nasdaq ends with 2% rally, yields slump as core CPI inflation cools

• Investors pour billions into S&P equal weight fund as tech fears rise
• Inflation revival persists as market risk despite CPI-fueled rally

Thursday, 16 January 2025

• Signs and portents for the U.S. economy:

• Oil settles lower on expected halt to Houthi shipping attacks
• Inflation revival persists as market risk despite CPI-fueled rally

Fed minions say they’re thinking about more rate cuts:

• Fed may cut rates sooner and faster than expected if disinflation holds up, Waller says
• Fed’s Goolsbee says he feels more comfortable that labor market is stabilizing, WSJ reports

BOJ minions expected to hike Japan interest rates no later than March 2025:

• BOJ to raise rates by end-March, most analysts lean toward January hike – Reuters poll

ECB minions thinking about multiple rate cuts for the Eurozone:

• ECB accounts show case for gradual, cautious rate cuts

Nasdaq, S&P, Dow end lower after rally ignited by rate-cut optimism

• Wall Street ends lower after rally as earnings, data eyed
• Wall Street could get a boost from $1 trillion in buybacks, Goldman says
• Trump’s policy pledges unleashing ‘animal spirits’, Wall St bankers say

Friday, 17 January 2025

• Signs and portents for the U.S. economy:

• Oil set for fourth week of gains as investors assess US sanctions impact

• US drillers cut oil and gas rigs to lowest since Dec 2021, Baker Hughes says
• Global diesel prices spike as US hits Russia with new sanctions

US single-family housing starts, permits hit 10-month high in December

US manufacturing output accelerates in December

US mid-sized banks ride industry upswing on robust fee income

Fed minions admit they’re failing to restrain Bidenflation:

• Fed’s Hammack says inflation remains a problem, WSJ reports

Bigger trouble, stimulus developing in China:

• China’s economy meets official growth target, but many feel worse off

• China’s Q4 GDP grows 5.4% y/y, beating market forecast

China kicks off subsidised auto trade-ins

China’s vast refining sector faces shakeout as fuel demand peaks

ECB minions getting excited to cut Eurozone interest rates more:

• ECB’s Elderson: we are not yet done easing policy

Bulls bellow as Wall Street surges to best week since November election

The Atlanta Fed’s GDPNow tool‘s projection of real GDP growth rate for the now-past quarter of 2024-Q4 rose to +3.0% from the previous week’s +2.7% annualized growth estimate. The BEA’s first estimate of GDP in 2024-Q4 will be released on 30 January 2024, when the GDPNow tool will shift to start nowcasting GDP for the current quarter of 2025-Q1.

Image credit: Microsoft Copilot Designer. Prompt: “An editorial cartoon of a Wall Street bull taking a box that says ’2025 RATE CUTS’ from a bear.”