What we learned last week:
“Were I to invoke logic, logic clearly dictates that he needs of the many outweigh the needs of the few.” – Spock (Leonard Nimoy), Star Trek II: The Wrath of Khan (1982)
Optimism over a U.S. – Iran peace agreement fueled markets higher last week. Not withstanding a fair share of challenges, both abroad and at home. The backdrop of a resilient U.S economy paired with the potential for adding oil to the supply chain gave stocks a push higher, sending the Dow Jones Industrial Average to a record high.
Challenges remain in the middle east, specifically in Lebanon, between Israel and Hezbollah, the Iranian-backed militant group. However, a deal was reached to open the Strait of Hormuz immediately, sending oil prices lower and closer to the price before the war started.
Markets balanced this optimism with the developments out of the first Fed meeting with its new Chairman Kevin Warsh. It was widely expected the Fed would hold interest rates steady. It was changes at an operational level that caught investors attention and generated a selloff in stocks.
The Federal Reserve held interest rates steady on Wednesday, at the range of 3.5% to 3.75%. Fed Chairman Kevin Warsh’s first meeting will be remembered for several reasons. In its summary of economic conditions, Fed officials removed language hinting at lower rates in the future and nine officials noted they see rates moving higher. Chairman Warsh also announced the formation of five task forces geared toward improving operations at the Fed and minimize future looking language, comments that would influences markets.
All that said, enthusiasm for a familiar theme reemerged to finish the holiday shortened week on a positive note.
Intel stock gained 7% on Thursday after President Trump said on Truth Social that the semiconductor company had agreed to a deal with Apple to design and build chips in the U.S.
Boosted by this news, optimism over the reopening of the Strait of Hormuz, tech stocks and the demand for AI chips came back into the picture to lead the week higher.
Turning our attention to this week, we have investors with a close eye on the events in the middle east. Back at home there are several companies reporting earnings from several key sectors and Friday’s PCE inflation report. Inflation is seen by the Fed as the biggest risk to price stability and why rate hikes may be necessary.
What’s ahead this week:
Economic Events
- Friday’s Personal Consumption Expenditures (PCE) report which tracks a wide range of consumer expenses and changes in consumer behavior will be center stage.
- Last week Fed Chair Warsh and the Fed committee decided to remove future guidance and state price stability will be the Fed’s number one priority, this and future inflation reports will likely be relied on heavier by market participants as insight into future Fed action on interest rates.
Earnings
- Several meaningful earnings report this week
- FedEx, and other freight companies, are looking to demonstrate continued strength from tariff related headwinds
- Carnival Corp. and Darden Restaurants is a check on consumer spending
- Micron reports after-hour market hours on Wednesday and will receive the most attention among investors. The memory chip company has almost quadrupled this year on the demand for memory chips surges for AI buildout.
My goal is for you to feel educated and informed about variables we do and don’t have control over and find ourselves working within. I hope to do it in an informative and relatable way. As always, I value your relationship and planning objectives – my door is always open for conversation.
