Weekly Market Watch

Under Pressure

Global equities largely salvaged a volatile week by rebounding Friday, with the value and small capitalization (cap) sub-asset classes outperforming in a continued rotation away from large-cap technology stocks. As earnings season progresses, investors are questioning the payoff from artificial intelligence (AI) spending plans. The tech-heavy Nasdaq-100^® experienced its worst three-day stretch since last April, and bitcoin posted its biggest one-day drop since 2022. Precious metals prices moderated last week, particularly silver, which pulled back after having had a strong start to the year. Most major bond indices were positive during the week as yields dipped on safe-haven demand, and the 10-year U.S. Treasury yield settled at 4.21%.

Market Outlook

Jobless claims ticked higher and job openings dropped last week. The U.S. payrolls report which will be released on Wednesday should provide a fuller picture of the labor market. The report was delayed due to the recent partial federal government shutdown. Further evidence of a softening labor market supports a more dovish path for monetary policy this year. We expect the ebb and flow of AI enthusiasm to continue this year, but strong overall fourth-quarter earnings growth remains a key support for equities.

Table of the Week

Following a heavy slate of S&P 500^® reports last week, the blended earnings growth rate increased 110 basis points from the prior week.

Strong results from the Mag 7 companies that reported were driven by robust cloud revenue, while increased AI-related capital expenditures weighed on stock reactions.

Fourth-quarter earnings wind down this week, and if the current blended growth estimate of 13.0% holds, it would mark the fifth consecutive quarter of double-digit earnings growth.

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