January 25 Markets Navigate Mixed Signals: Strong Jobs Data Meets Subdued Consumer Sentiment

With 256,000 jobs added in December and PMI showing expansion at 52.4, markets wrestle with robust employment against cautious consumer outlook. Here's your essential market intelligence.

Employment data released this month shows remarkable strength in the U.S. labor market, with December posting 256,000 new jobs, significantly exceeding expectations. The unemployment rate holds steady at 4.1%, with particularly strong gains in healthcare (+46,000) and retail (+45,000) sectors. This robust job growth signals continued economic resilience, providing a solid foundation for market optimism as we move through early 2025.

The S&P Global US Composite PMI reading of 52.4 confirms ongoing business expansion, remaining comfortably above the 50-point threshold that separates growth from contraction. This positive indicator suggests sustained economic momentum, despite broader market uncertainties.

In the Treasury market, yields have shown a notable downward trend, with the 2-year at 4.25% and the 10-year at 4.60%. This movement reflects reduced inflation concerns and shifting market expectations regarding future Federal Reserve policy. Global markets are responding positively, with stock markets trending higher and the dollar showing weakness. The banking sector, in particular, has demonstrated strong performance.

Looking ahead, investors should keep a close watch on several key economic releases in the coming week:

  • Chicago Fed National Activity Index
  • New Home Sales
  • Durable Goods Orders
  • Fourth Quarter GDP (Advance Reading)
  • PCE Price Index

The strategic outlook remains mixed, with consumer sentiment staying subdued according to the University of Michigan Index, while long-term inflation expectations hover at 3.2%. Professional forecasters project 2025 GDP growth at 2.1%, with CPI inflation at 2.4% and unemployment expected to settle at 4.3%. The 10-year Treasury yield is forecasted to reach 4.1% by year-end.

For investors, the key focus areas should be next week's economic data releases, Federal Reserve commentary on the rate trajectory, consumer confidence trends, and corporate earnings, particularly in the banking sector. The Federal Reserve is expected to maintain current rates with potential cuts projected for the first half of 2025.