1. Weekly closing data of major indices
Compared to January 31, 2025, the major indices showed mixed performance with modest volatility adjustments:
Dow Jones Industrial Average (DOW): 44,303.4 (-0.54%)
NASDAQ 100 (NDX): 21,491.31 (+0.06%)
Russell 2000 Index: 2,279.71 (-0.35%)
Philadelphia Semiconductor Index (SOX): 5,009.34 (-0.13%)
S&P 500 Index (SPX): 6,025.99 (-0.24%)
CBOE Volatility Index (VIX): 16.54 (+0.67%)
VXX (Short-Term Futures ETN): 43.96 (-0.36%)
VXZ (Mid-Term Futures ETN): 51.04 (+0.26%)
The slight uptick in the VIX suggests lingering uncertainty, while the mixed performance across indices indicates sector-specific dynamics rather than broad market shifts.
2. Key developments of the week
Earnings Impact:
Earnings reports delivered mixed signals, influencing market sentiment throughout the week. Alphabet (GOOGL)reported strong revenue growth but announced a $75 billion AI infrastructure investment, triggering a 7.3% stock declinedue to investor concerns over spending. AMD posted solid financial results, yet missed data center revenue expectations, leading to a 6.3% drop. Pfizer (PFE) beat earnings estimates with a 22% revenue increase but saw its stock fall 2% due to declining COVID vaccine sales. Disney (DIS) exceeded earnings expectations, but a decrease in Disney+ subscribers caused a 2.4% decline. Uber (UBER) surpassed revenue forecasts but conservative growth projections led to a 7.6% drop. Meta Platforms (META), reported previously, surged 18% thanks to strong AI-driven advertising growth, while Apple (AAPL) maintained stability with a 2% gain after beating expectations. Amazon (AMZN) and PayPal (PYPL)earnings had less pronounced market reactions, with Amazon’s AWS growth under scrutiny and PayPal navigating increased fintech competition. Eli Lilly (LLY) outperformed with higher-than-expected earnings, providing a bright spot in the healthcare sector.
3. Economic indicators released last week (Feb 3–7, 2025)
Labor Market:
Nonfarm Payrolls (January 2025): The U.S. economy added 143,000 jobs in January, below the anticipated 170,000. Despite the slowdown, the unemployment rate decreased to 4% from 4.1% in December.
Inflation and Consumer Sentiment:
Consumer Sentiment Index (February 2025): The University of Michigan's index dropped to 67.8 from 71.1 in January, the lowest since July, with one-year inflation expectations rising to 4.3% from 3.3%.
Trade Balance:
U.S. International Trade in Goods and Services (December 2024): The trade deficit widened to $67.4 billion, up from $61 billion in November, as imports increased and exports declined.
Manufacturing Sector:
ISM Manufacturing Index (January 2025): The index rose to 49.6 from 49.2 in December, indicating a slight improvement but still below the 50 threshold that separates contraction from expansion.
Productivity and Costs:
Productivity (Q4 2024): Nonfarm business sector labor productivity increased by 1.7% in the fourth quarter of 2024, while unit labor costs rose by 2.4%, suggesting moderate inflationary pressures.
These indicators paint a picture of a moderating labor market, rising consumer inflation expectations, and ongoing challenges in the manufacturing sector. The Federal Reserve is likely to monitor these developments closely as it considers future monetary policy actions.
4. Geopolitical Environment
Middle East Developments:
Gaza Ceasefire Negotiations: The ceasefire remains in effect with ongoing prisoner exchanges. No significant escalations were reported, maintaining relative regional stability.
U.S.-Israel Talks: Discussions between Israeli Prime Minister Benjamin Netanyahu and U.S. Envoy Steve Witkoff in Washington continued, focusing on the next phase of the ceasefire and the release of remaining hostages.
Protests in Rafah: Protests over President Trump's proposal to relocate Gazans to Egypt and Jordan persisted but did not escalate into broader conflict.
Ukraine-Russia War Developments:
Ceasefire and Election Proposal: The U.S. proposal for Ukrainian elections contingent on a ceasefire remains contentious, with Ukrainian officials demanding more security guarantees.
Zelenskyy’s Concerns: Ukrainian President Volodymyr Zelenskyy continues to push for direct involvement in U.S.-Russia negotiations.
Trade Tensions:
U.S. Tariffs Suspension: On February 3, 2025, President Trump announced a 30-day suspension of the proposed 25% tariffs on imports from Mexico and Canada, following agreements to enhance border security and combat drug trafficking. However, the 10% tariff on Chinese imports went into effect as scheduled on February 4, 2025. This temporary de-escalation with North American partners alleviated immediate market concerns, though tensions with China continue to weigh on investor sentiment.
EU's Response: The European Union signaled readiness to retaliate against potential future U.S. tariffs on European goods, highlighting ongoing trade uncertainties.
5. Upcoming earnings releases (Feb 10–14, 2025)
February 10:
McDonald's Corporation (MCD)
Rockwell Automation, Inc. (ROK)
ON Semiconductor Corporation (ON)
February 11:
Shopify Inc. (SHOP)
Coca-Cola Company (KO)
February 12:
Reddit
Cisco Systems (CSCO)
February 13:
Palo Alto Networks (PANW)
Applied Materials (AMAT)
6. Upcoming economic indicators (Feb 10–14, 2025)
February 12:
Consumer Price Index (CPI) for January 2025
Real Earnings for January 2025
February 13:
Producer Price Index (PPI) for January 2025
February 14:
U.S. Import and Export Price Indexes for January 2025
7. Central banks actions
Federal Reserve (Fed): On February 5, 2025, the Fed released its 2025 bank stress test scenarios, assessing major banks' resilience amid severe economic downturns, including projected spikes in unemployment and declines in real estate values.
Bank of England (BoE): On February 6, 2025, the BoE reduced its base interest rate from 4.75% to 4.5%, marking the third cut since 2020, aiming to stimulate the slowing UK economy.
Reserve Bank of India (RBI): On February 7, 2025, the RBI cut its key repo rate by 25 basis points to 6.25%, the first reduction since May 2020, to boost economic growth amid disinflationary pressures.
8. Market sentiment and volatility analysis
The week exhibited a mix of earnings-driven fluctuations, economic data responses, and geopolitical events. While the quantitative model suggests moderately stable volatility, qualitative factors introduce nuanced risks.
Earnings Impact: Strong corporate earnings from Meta, Apple, and Eli Lilly provided a buffer against broader market volatility. However, concerns over Alphabet’s AI spending and AMD’s data center performance highlight potential tech sector vulnerabilities.
Geopolitical Risks: The temporary suspension of tariffs with Mexico and Canada reduced immediate trade risks, but new tariffs on Chinese imports and ongoing EU-U.S. trade tensions sustain global uncertainty. Meanwhile, the ceasefire in Gaza holds, but tensions in Ukraine persist without significant resolution. These dynamics maintain a background level of geopolitical risk that could influence volatility.
Economic Indicators: The underwhelming nonfarm payrolls report and rising inflation expectations point to potential economic headwinds. However, moderate productivity growth and stable manufacturing data mitigate immediate recession fears.
VIX Outlook for the Week of February 10, 2025:
Integrating both qualitative insights and quantitative model forecasts, the VIX is expected to remain in a moderately stable range, though risks remain from geopolitical tensions and economic data surprises.
Expected VIX Level: 17.85
Scenario Analysis:
(VIX < 15): ~25% probabilityWhile the quantitative model suggests a higher chance of VIX dropping below 15, geopolitical risks and economic uncertainties temper this likelihood.
(VIX 15-20): ~55% probabilityThis remains the most probable scenario, supported by both model forecasts and qualitative analysis. Markets are cautiously optimistic, but potential shocks from upcoming earnings and economic data releases could maintain moderate volatility.
(VIX > 20): ~20% probabilityWhile the quantitative model assigns a lower probability to high volatility, qualitative factors like escalating trade tensions with China or unexpected inflation data could elevate this risk.
This report is for informational purposes only and does not constitute financial, investment, or trading advice. Market conditions can change rapidly, and this report reflects data available as of February 7, 2025.
Comentarios