Weekly Market Recap: Market Whiplash - Tech Selloff, Fed Moves & Global Shakeups—What’s Next?

Market Overview:

U.S. equities saw robust gains as major indices extended their upward momentum, supported by optimism surrounding the $500 billion AI infrastructure initiative "Stargate." The S&P 500 rose 1.76%, the Dow Jones gained 2.19%, and the Nasdaq added 1.65%. Growth stocks outperformed value, with industrials, communication services, and energy leading sector gains. Internationally, European equities marked their fifth straight week of growth, buoyed by positive corporate earnings and dovish European Central Bank (ECB) remarks. Meanwhile, Asian markets advanced despite U.S. tariff uncertainty, with Japan seeing gains ahead of a Bank of Japan rate hike.

Fixed income markets were relatively steady, with Treasury yields ending little changed. The Bloomberg Aggregate Bond Index edged higher, aided by weaker-than-expected U.S. flash PMI data. Commodities experienced mixed results, with gold rallying on safe-haven demand amid tariff concerns, while crude oil fell as OPEC+ faced pressure to raise production.

Federal Reserve Insights and Economic Roundup:

The Fed remains focused on anchoring long-term inflation expectations, which stayed steady at 3.3% according to the University of Michigan's survey. Short-term inflation challenges persist, limiting the likelihood of rate cuts in the coming months. Labor market data showed a tight but slightly slowing job market, with continuing unemployment claims hitting their highest level since 2021.

The housing market continues to grapple with affordability headwinds despite an uptick in existing home sales in December. Elevated mortgage rates and sticky inflation are expected to weigh on homebuyers throughout 2025.

The Week Ahead:

Investors will monitor key economic indicators and the Federal Reserve’s rate decision this week. Key data releases include:

• Monday: Chicago Fed National Activity Index, New Home Sales, Building Permits (Dec)
• Tuesday: Durable Goods Orders, Consumer Confidence Report, Richmond Fed Manufacturing Index (Jan)
• Wednesday: Advance Goods Trade Balance, FOMC Rate Decision
• Thursday: Q4 GDP and Core PCE Price Index (advance readings), Initial Jobless Claims
• Friday: Employment Cost Index, Personal Spending, Core PCE Price Index (Dec)

With Q4 GDP data and the Fed’s first rate decision of 2025, market participants will look for signals on economic resilience and the central bank’s inflation strategy.