Weekend Update, February 24th, 2025
Index, Sector & Asset Performance
The S&P 500 ended its normal seasonally weak, February option expiration week, down -1.7% at 6013. The S&P 500 is down -0.5% in February, but up +2.2% this year. The year-to-date performance of the S&P 500 mirrors historical 1st year Presidential term seasonals. Here is that data from Steve Suttmeier’s group at BAC-Merrill Lynch. The good news? Seasonals start improving later this week if history is a guide.
On the back of weaker consumer spending data, the consumer discretionary sector experienced the largest drop last week, down -4.3%, followed by a -3.7% decline in communication services (META, SPOT, GOOGL). Industrials, materials, financials and technology also fell hard.
Cruise stocks sank in the consumer discretionary sector as newly confirmed US Commerce Secretary, Howard Lutnick, suggested the Trump administration would force cruise operators to pay US taxes. Shares of Royal Caribbean Cruises (RCL) and Carnival (CCL) fell -11% each on the week while Norwegian Cruise Line Holdings (NCLH) lost -8.6%.
In communication services, shares of Meta Platforms (META) fell -7.2%. The company said that it has increased the target bonus for each of the company’s executive officers, other than its chief executive, to 200% of base salary from 75%, beginning with the 2025 annual performance period.
European stocks led along with Chinese equities are up +10.4% and +20% YTD respectively.
The “boring” utilities sector rose +1.4%, followed by gains of +1.1% each in energy and health care. Interest rate sensitive consumer staples and real estate also rose.
Apple announced plans to invest $500 billion in the U.S. over the next four years.
Berkshire Hathaway’s 4q24 operating earnings surged +71% to $14.5 billion on strength in the company’s large insurance operations and higher investment income. Insurance underwriting jumped 302% from a year earlier to $3.41 billion
U.S. Treasury yields rallied and close on the 10-year note at 4.4%. Long yields have dropped -37 bps from their mid-Jan peak of 4.8% due to a decline in real interest rates, suggesting growth concerns are driving the move. Last week, new tariff proposals and downbeat guidance from Walmart acted as catalysts for lower yields. Higher inflation expectations are being offset by lower real growth expectations as yields drop. Real growth concerns normally peak late February while inflation worries peak currently as well. A reversal of both data series would be a positive market catalyst after these two offsetting dynamics have left the S&P 500 nowhere fast since its Dec 6th closing ATH.
Economic Indicators and Earnings Commentary
Data released last week by the National Association of Realtors showed home sales in the US dropped more than expected amid elevated mortgage rates and higher prices. Starts also fell more than expected last month amid declines in single- and multi-family projects. University of Michigan consumer confidence fell to its lowest in 15 months.
Personal spending slowed sharply in January, partly due to weather, the LA wildfires, and payback from a strong holiday shopping season.
For those tracking government data series, U.S. GDP is estimated to grow +2.3% in 1q25, according to the Atlanta Fed, which would be a slowdown from 2.9% in the 4q24.
The Fed’s favorite inflation metric, core PCE inflation is released on Friday. There are several speaking engagements by Fed officials this week.
This week’s earnings calendar includes Home Depot (HD), Intuit (INTU), NVIDIA (NVDA), Salesforce (CRM), Lowe’s (LOW), TJX (TJX) and Berkshire Hathaway (BRK.A, BRK.B).
Global Market Trends/Commodities/Currencies
Oil prices are doing nothing fast at $70bbl. Natural gas prices remained elevated as a cold weather has moved across much of the U.S. coffee and cocoa prices rolled hard. Grain and lumber prices are moving higher on tariff concerns.
Gold is approaching $3,000/oz. on the back of lower rates and geopolitical worries.
Bitcoin is bouncing around between $95,000- $97,000.
The U.S. dollar has fallen by more than 2% on a weighted basis over the past month.
Oak Harvest Weekly Stock Talk
Past performance is no guarantee of future results. Indexes are unmanaged and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges.
