Markets ended the week lower as investors continued to fret about the potential impact of AI on various industries. Economic data was highlighted by employment and inflation data which were both constructive for different reasons. The January jobs report suggests the Fed could delay the timing of future rate cuts, while the consumer inflation report suggests the Fed could pull forward its next rate cut.
Bonds recorded their strongest weekly gain since September aided by the relatively benign consumer inflation data as well as investors seeking haven assets in the face of continued equity market volatility. Near the short end of the Treasury curve, 2-year rates fell ~0.09% to 3.41%, their lowest level since 2022. Further out, 10-year rates fell ~0.15% to 4.05%, their lowest level since November.
Market expectations regarding the timing of the next Fed rate cut were unchanged with the Fed’s June meeting still viewed as the next opportunity. However, expectations for a third cut in 2026 increased from 41% to 50%, which helped drive some of the decline in rates seen across the Treasury curve during the week.
Through Friday, 74% of S&P 500 companies had reported 4Q25 earnings, with 74% of those companies beating their consensus estimate. According to industry group FactSet, consolidated earnings growth for 4Q25 is expected to be 13.2%, which if achieved, would mark the 5th consecutive quarter of double-digit earnings growth.
