Financial News for the Week of April 25th, 2025
Financial News Highlights
- Trade tensions between the world’s two largest economies simmered this week, with the U.S. administration hinting that the tariffs on China would likely be lowered in the very near future in financial news.
- But President Trump appeared frustrated with the lack of progress among other countries, and threatened to reimpose the reciprocal tariffs in the coming weeks if trade deals weren’t signed.
- Amidst all the uncertainty, the housing recovery appears to be on hold. Existing home sales declined to a six-month low in March.
Searching for the Signal Amidst A Lot Of Noise
Disentangling the signal from the noise on U.S. trade matters is becoming an increasingly difficult task. This week, President Trump and U.S. Treasury Secretary Scott Bessent both called out the tariffs on China as being “too high”. At 145%, Bessent said trade with China becomes “unsustainable” and that he expects the current situation to de-escalate in the “very near future”. China appears open to negotiations and even went as far as exempting some U.S. goods from its retaliatory tariffs. The abrupt U-turn in the administration’s tone alongside President Trump’s assurance that he will not remove Fed Chair Powell, helped to fuel a mid-week rally in U.S. equities, with the S&P 500 ending the week up 3.5%. But investors remained skeptical of whether the move to de-escalate was the beginning of a broader pivot or simply backpedaling on the overly punitive levies imposed on China given the significant economic repercussions.
Despite claims of over 90 countries having offered to negotiate trade terms, President Trump appears to be growing frustrated with the lack of progress made on reaching deals. He even went as far threatening to re-impose the “reciprocal” tariffs on some countries over the coming weeks if trade deals weren’t signed.
But even if there’s a big push on trade negotiations over the coming weeks, at least some economic damage has already been done. In the April release of the Federal Reserve’s Beige Book, several districts noted a considerable worsening in the economic outlook amid heightened uncertainty stemming from tariffs in financial news. Spending on both business and leisure travel were down, with some districts seeing an outright decline in international visitors. On inflation, many businesses noted that they’re already seeing input costs rise and that they expect to pass-on at least some of the additional costs to consumers. But this may not be possible for some consumer-facing sectors, who are already reporting more tepid demand.
Estimates done by Reuters suggest that of the S&P 500 companies who have already reported quarterly earnings, over 90% have mentioned tariff risks in their earnings transcripts. This is more than double what was mentioned the prior quarter and underscores how today’s uncertainty is touching nearly all industries. This does not bode well for capital spending.
The housing recovery is also looking to be on hold. Existing home sales declined 5.9% m/m in March, falling to a six-month low of 4.0 million units (Chart 1). With mortgage rates again within spitting distance of 7%, and households increasingly worried about employment prospects, we’re likely to see a further pullback in sales activity over the coming months. Construction activity was also sharply lower in March, amid elevated trade uncertainty and higher input costs. Homebuilder confidence for April remained soft, suggesting little rebound in near future.
Our current tracking for first quarter real GDP (released April 30th) suggests economic growth grew by just 0.3% annualized after expanding by an above trend pace of 2.9% through the second half of 2024 (Chart 2). But the GDP release will play second fiddle to next week’s more timely April jobs report. Expectations are that the economy added 130k jobs in April, a meaningful stepdown from March’s 228k pace.
This Financial News report is provided by TD Economics. It is for informational and educational purposes only as of the date of writing and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this financial news report has been drawn from sources believed to be reliable but is not guaranteed to be accurate or complete. This report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise the TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered. Do you have any questions about your finances? As financial advisors in Cornelius NC, Naples FL, and Moultonborough NH we are happy to help.
To see more news reports, click here.
Financial News for the Week of April 11th, 2025
Financial News Highlights
- Market sentiment soured earlier this week as ‘reciprocal’ tariffs went into effect in financial news. Equities sold off initially, but so did Treasuries, with the 10-year Treasury yield up sharply on the week.
- A decision to ease U.S. tariff measures on most countries targeted last week, while increasing tariffs on China, sent markets on a rollercoaster.
- Inflation came in lower than anticipated in March, with core CPI easing to 2.8% year-on-year from 3.1% previously.
Tariff Rollercoaster Continues, Trade Fight with China Escalates
Another tumultuous week has followed for financial markets. On the heels of last week’s announcement that the U.S. would implement higher reciprocal tariffs on a number of countries, some appeared to have reached out for negotiation, while a few others announced their own countermeasures. What stood out was China’s commensurate retaliation to the 34% additional U.S. tariff on Chinese goods in financial news. But this was only the beginning, with the trade fight escalating throughout the week. As higher reciprocal tariffs came into effect, equity markets sold off. Normally when this happens, Treasuries (considered a safe-haven asset) tend to rally. But, in a very concerning move, Treasuries sold off too. Yields (which move opposite to bond prices) shot higher. The dollar also lost considerable ground against a basket of foreign currencies. Before long, the White House appeared to extend an olive branch. In a surprising move, Pres. Trump announced a 90 day pause to last week’s reciprocal tariffs, while also lowering the country-specific rate to a universal 10% for all targeted countries, except for China. Tariffs on the latter were jacked up further. Stock markets rejoiced initially, staging a sharp recovery on Wednesday. But when it came to yields and the dollar, the weak trends described above resumed later in the week (Chart 1).
Pulling back the lens on the many twists and turns from this week’s events, one thing is clear – the U.S. is softening its tariff stance with most partners targeted last week, but is tightening the screws on China. The White House has clarified that the tariff increases on China so far add up to 145%, while this morning China announced it will increase retaliatory tariffs on U.S. goods to 125%. If tariffs were to hold at these high levels for a while, a large chunk of trade with China would effectively be cut off. While China’s economy would undoubtedly take a hit, as its $439 billion worth of goods sent to the U.S. last year dwindle to something much lower, there 
will be major consequences at home too. Reduced access to the Chinese market for U.S. exporters is a first. But perhaps a more concerning aspect is the prospect of product shortages, along with higher prices for inelastic products that can’t be sourced from elsewhere in short order. Domestic production cannot fill the void that will be left by China over the near-to-medium term. In this vein, the trade war will also remap supply chains, with the U.S. inclined to seek product substitutes from other countries, while Chinese exporters will seek to expand in other markets, such as in Europe.
Apart from leaving a mark on financial markets, trade uncertainty is also weighing on consumers and businesses, with the NFIB small business confidence measure continuing to trend lower in March. On a more positive note, producer prices, and inflation as measured by CPI, both came in softer than anticipated last month. Lower energy prices dragged down total CPI inflation (2.4% year-on-year (y/y)), but core inflation also eased, cooling to 2.8% y/y from 3.1% previously. Still, considering the tariffs and the fact that consumers are positioning for higher inflation, this trend looks set to reverse course soon (Chart 2). This leaves the Fed in a difficult position. Minutes from the mid-March FOMC meeting suggest that the central bank wasn’t ready to alter its course yet, with Fed officials leaning against preemptive rate cuts. While a lot has changed in the last three weeks, messaging from Fed officials appears consistent, with several speeches this week driving home the point that the bar for rate cuts remains high.
This Financial News report is provided by TD Economics. It is for informational and educational purposes only as of the date of writing and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this financial news report has been drawn from sources believed to be reliable but is not guaranteed to be accurate or complete. This report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise the TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered. Do you have any questions about your finances? As financial advisors in Cornelius NC, Naples FL, and Moultonborough NH we are happy to help.
To see more news reports, click here.
Financial News for the Week of March 28th, 2025
Financial News Highlights
- This week’s announcement of new automobile tariffs caught markets by surprise in financial news. But now all eyes are focused on updates on reciprocal tariffs next week.
- The U.S. economy had been humming, but as uncertainty ramps up and consumer confidence continues to dip, the risks of a slowdown are building.
- Worryingly, inflation momentum picked up again in February suggesting price growth could be stickier than anticipated.
Waiting for April 2nd
After steadily rallying since mid-March, markets took a step back this week when new U.S. tariffs on automobiles and parts were announced. The news comes ahead of next week’s much anticipated update on reciprocal tariffs that are expected to cover major U.S. trading partners. In the meantime, February’s Personal Income and Outlays report showed that core inflation picked up again, while spending growth failed to recover from last month’s decline in financial news. The U.S. economy had been humming, but as uncertainty ramps up and consumer confidence continues to dip, the risks of a slowdown are building. All eyes are now firmly focused on next week’s tariff announcement for more clarity on the operating environment going forward.
The big news this week was President Trump’s announcement of new tariffs on automobile imports of 25%, set to take effect on April 3rd. This comes ahead of the expected announcement next week on reciprocal tariffs that markets had been bracing for. At the time of writing, most countries had held off on any new retaliation, likely opting to wait and see what’s in store from next week’s announcements before proceeding. As we wrote, the full impact of the autos tariffs will depend on their duration and how much of the cost firms pass along to their customers.
Yet, while we await more clarity on the import taxes, consumer confidence continues to dip, and the darkening moods appear to be flowing through to behavior. The Conference Board measure of consumer confidence has fallen to its lowest level since early-2021. With sinking sentiment, an adjustment in consumer spending appears to be unfolding as real outlays in February failed to recover from the tumble they took in January (Chart 1). This leaves the three-month annualized change in real consumer spending at 0.2%, well short of the 4.6% clip recorded in December. First quarter consumer spending is now tracking only a 0.5% annualized pace, a downgrade from our recent forecast. Importantly, the pullback in real spending is coming at a time of still-healthy income growth, so with the savings rate ticking up to 4.6% (its highest level since June of last year), this suggests that some precautionary savings could be taking place.
Part of the story is that inflation looks to be heating up again. Higher price growth is cutting into consumers’ purchasing power, restraining real outlays. The core personal consumption expenditures price index saw its biggest monthly gain since January of last year, taking the annual pace to 2.8% (Chart 2). Inflation momentum appears to be gaining steam, and consumer are noticing. Inflation expectations for the year ahead jumped to their highest levels since late-2022.
For the Fed, the combination of softening growth and rising inflation are troublesome. Yet, what could make it more complicated is if inflation expectations continue to rise, creating a self-reinforcing loop of greater price pressures. For now, though, we wait for next week for more clarity on the next set of tariffs to better guide our assumptions around the forecast.
This Financial News report is provided by TD Economics. It is for informational and educational purposes only as of the date of writing and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this financial news report has been drawn from sources believed to be reliable but is not guaranteed to be accurate or complete. This report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise the TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered. Do you have any questions about your finances? As financial advisors in Cornelius NC, Naples FL, and Moultonborough NH we are happy to help.
To see more news reports, click here.
Financial News for the Week of March 21st, 2025
Financial News Highlights
- The FOMC held the policy rate steady at a target range of 4.25%-4.5% for the second consecutive meeting in financial news. But, committed to slowing the pace of balance sheet runoff of its U.S. Treasury holdings.
- Revised economic projections showed a small downgrade to the FOMC’s growth outlook, but a near-term upgrade to inflation. The median forecast still expects 50bps of rate cuts by year-end.
- February data out this week were mixed. Retail sales underwhelmed, while housing data rebounded from January’s weather induced slide.
Uncertainty Clouding the Outlook
With no new tariff announcements, trade tensions were temporarily moved to the backburner this week, allowing investors to shift the focus to the economic data calendar. February data readings out this week were mixed. Retail sales underwhelmed expectations, but both housing starts, and existing home sales largely recovered from January’s weather induced slide. Meanwhile, in financial news the Federal Reserve held the policy rate steady at a target range of 4.25%-4.5% but signaled an intention to slow the pace of balance sheet runoff for U.S. Treasury holdings starting in April. While investors were braced for a more downbeat messaging on the outlook, the Fed’s statement and Chair Powell’s press conference struck a more balanced tone. This helped to temporarily soothe unnerved financial markets, but growth fears reemerged by late-week, fueling a further sell-off. At time of writing, the S&P 500 was down 0.5%, while term yields traded lower by about 10bps, with the 10-year Treasury currently sitting at 4.22%.
The Fed’s statement included updated economic projections from FOMC members. The median GDP forecast was revised lower over the forecast, with a below-trend pace of economic growth expected in 2025 (1.7% from 2.1%), before steadying at 1.8% in 2026 (previously 2.0%) and 2027 (previously 1.9%). The unemployment rate was nudged higher by a tick this year to 4.4% but remained unchanged at 4.3% in 2026 and 2027. Core PCE inflation was also revised higher for 2025 (2.8% from 2.5%), which Chair Powell largely attributed to tariff impacts. Importantly, the revised “dot plot” still showed two 25bps rate cuts for this year. But a closer inspection of the dots shows that committee members see the balance of risks skewed towards fewer cuts, as eight officials now expect one or no cuts this year (up from four in December) (Chart 1).
During the press conference, Chair Powell characterized the economy as “strong”, but emphasized that any point forecasts remain “highly uncertain” in light of recent policy changes under the new administration. When asked about the recent pullback in business and consumer sentiment measures, Powell reiterated that the “hard data” are still showing an economy that is “solid”. He also downplayed the recent jump in inflation expectations shown in the University of Michigan survey, characterizing it as an outlier relative to most other measures.
But this week’s retail sales data suggests otherwise. Retail sales rose by just 0.2% m/m in February, after declining 1.2% in January. Only 5 of the 13 major categories (Chart 2) saw gains last month while revisions to January showed an even weaker pace of retail spending than previously reported. Moreover, spending at bars & restaurants – the only services-based metric included in the retail report – plunged by 1.5% or the largest monthly pullback in two-years. This bears close watching, as discretionary services spending has been a key driver underpinning the strength of the consumer in past years.
For now, the Fed appears comfortable to sit tight and wait for more clarity on both the policy and data front. This will not come from any one policy announcement or data reading, suggesting policymakers will remain on the sidelines for at least another few months before making their next move.
This Financial News report is provided by TD Economics. It is for informational and educational purposes only as of the date of writing and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this financial news report has been drawn from sources believed to be reliable but is not guaranteed to be accurate or complete. This report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise the TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered. Do you have any questions about your finances? As financial advisors in Cornelius NC, Naples FL, and Moultonborough NH we are happy to help.
To see more news reports, click here.
Financial News for the Week of February 28th, 2025
Financial News Highlights
- The Fed’s preferred inflation metric, core PCE, rose 2.6% year-on-year in January, in-line with expectations and continuing to converge with the Fed’s 2% target in financial news.
- The Conference Board’s Consumer Confidence Index showed a material decline in February, as tariffs weighed on sentiment and boosted inflation expectations.
- The President announced an additional 10% tariff on China set to take effect on March 4th, in concert with the previously announced 25% tariffs against Canada and Mexico.
Angst Builds with Tariff Threats
The final week of February included an update on the health of the American consumer, and the Federal Reserve’s preferred inflation metric in financial news. Meanwhile, financial markets remained cautious as the prospect for broad-based tariffs to go into effect next week against the nation’s three largest trading partners kept sentiment subdued. As of the time of writing, the S&P 500 was down 2.3% on the week, while the 10-year Treasury yield fell nearly 20 basis-points to 4.24%.
The impact of tariff threats on consumer confidence has partially contributed to the negative sentiment in financial markets over the past week. Last Friday, the University of Michigan consumer sentiment index fell to its lowest level in 15 months, and this was followed by the Conference Board Consumer Confidence Index dropping sharply this week to an eight-month low. The Conference Board’s survey also noted that mentions of trade and tariffs had risen to a level last seen in 2019. While we saw real personal consumption expenditures fall 0.5% month-on-month in January in data released this week, severe weather undoubtedly played a role.
At the same time, consumer surveys have also begun to show signs of rising inflation expectations (Chart 1), which could present a risk for the Federal Reserve’s mission to return inflation to their 2% target. Core PCE inflation, the Fed’s preferred metric, rose 2.6% year-on-year in January. Looking at the three-month annualized percentage change, momentum has continued to trend favorably (Chart 2) with both the housing and excluding housing subcategories within range of pre-pandemic levels. However, these metrics remain slightly elevated on aggregate, which supports the Federal Reserve’s holding pattern. This, combined with rising inflation expectations, is also likely why several of the Federal Reserve officials we heard from this week favored a patient approach to future monetary policy adjustments, particularly amid elevated uncertainty. Market pricing has the Fed returning to rate cuts in June, with one additional rate cut before year end – in line with the median FOMC official projection from December.
Looking ahead to next week, there will be plenty to keep markets on their toes. First up will be the potential for the 25% tariffs on Canada and Mexico, plus the new additional 10% tariff on China announced this week, to be implemented next Tuesday. If an eleventh-hour resolution cannot be achieved again, then significant trade disruptions would likely follow. President Trump will also be delivering his State of the Union address on Tuesday, which may include new policy considerations. Lastly, we’ll round out the week with the employment report for February on Friday, which will be the last employment report released prior to the Fed’s next meeting in mid-March. Consensus expectations currently call for 158k new jobs to have been created this month, which would likely be viewed positively by the Federal Reserve. All-in-all, there will be plenty of information released next week to guide expectations in the months ahead.
This Financial News report is provided by TD Economics. It is for informational and educational purposes only as of the date of writing and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this financial news report has been drawn from sources believed to be reliable but is not guaranteed to be accurate or complete. This report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise the TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered. Do you have any questions about your finances? As financial advisors in Cornelius NC, Naples FL, and Moultonborough NH we are happy to help.
To see more news reports, click here.
Financial News for the Week of February 21st, 2025
Financial News Highlights
- Fed Speakers this week emphasized the need for a data-dependent approach to policy decisions in financial news.
- As a result, next week’s inflation data in the Personal Income and Outlays Report for January will be closely watched.
- From our lens, the Fed is likely to remain on pause until the second quarter of this year, delivering two cuts by year end, as healthy economic activity supports the labor market and price growth.
Data Dependent Decisions
In the absence of major economic data, equities and Treasury yields were a smidge below where they started the week after reacting to a flash PMI release on Friday that suggested shrinking activity in the services sector in February (Chart 1). That said, the focus is on next week, when the second update of fourth quarter GDP and January’s Personal Income and Outlays report will give a fresh look at economic momentum and the first look at the Fed’s preferred inflation metric for 2025. Fed speakers provided some insights this week on why the data-dependent approach is key when looking to understand how inflation will evolve in a still-healthy economy.
At the start of the week Board member Christopher Waller gave a speech in Sydney with a title that left very little ambiguity, “Disinflation Progress Uneven but Still on Track. Rate Cuts on Track as Well.” The speech clearly outlined his views, including that monetary policy is restrictive and “putting downward pressure on inflation”, while economic momentum is holding up. Vice Chair Jefferson spoke later in the week, reaffirming the view that the economy and labor market are on solid footing, and the need to maintain a data dependent approach. Dr. Jefferson focused on the strength of household balance sheets and how they are supporting consumer spending. The key was that while they are generally in good position, households with lower- and middle-incomes “have less of a buffer of liquid assets than they did before the pandemic” and keeping an eye on balance sheet developments will help “inform forecasts of overall economic activity”.
One interesting concept to monitor was Dr. Waller’s acknowledgement that progress on cooling inflation in the early part of the year has been notably slow in past years. This could be attributable to “residual seasonality”– the idea that the price adjustments that usually come in the early part of the year are now bigger than they were typically and are showing up in the seasonally adjusted data that should have accounted for them. This is an interesting wrinkle, and Dr. Waller cited research that price pressures have tended to be greater in the first half of the year relative to the second in 16 of the past 22 years. The expectation then would be that even with stronger-than-expected inflation in the early part of the year, this effect should fade into the latter part of 2025, as it did in 2024.
With speakers emphasizing the data-dependent approach, the focus will then be on the Personal Income and Outlays report on next Friday in financial news. The spending figures could be noisy, as cold weather and large fires in Los Angeles likely disrupted economic activity, so the focus will be on what happens with inflation. Current expectations are for the core PCE price index (the Fed’s preferred inflation gauge) to clock in at around 0.2%-0.3% month-on-month in January (2.6% year-on-year, Chart 2), but as Dr. Waller suggested even an upside surprise could be due to some residual seasonality. From our lens, the Fed is likely to remain on pause until the second quarter of this year, delivering two cuts by year-end, as healthy economic activity supports the labor market and price growth.
This Financial News report is provided by TD Economics. It is for informational and educational purposes only as of the date of writing and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this financial news report has been drawn from sources believed to be reliable but is not guaranteed to be accurate or complete. This report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise the TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered. Do you have any questions about your finances? As financial advisors in Cornelius NC, Naples FL, and Moultonborough NH we are happy to help.
To see more news reports, click here.
Financial News for the Week of February 14th, 2025
Financial News Highlights
- President Trump announced a universal 25% tariff on all steel and aluminum imports, effective March 12th in financial news.
- January CPI came in hotter than expected, with core inflation rising at its fastest monthly pace since March 2024.
- Speaking at a semiannual congressional hearing, Chair Powell emphasized that policymakers were in no rush to cut rates.
Hot CPI + Trade Uncertainties = Extended Fed Pause
Tariffs remained the policy focus of the new administration this week, with President Trump announcing a universal 25% tariff on all steel and aluminum imports into the U.S., effective March 12th. Financial markets were largely unperturbed by the announcement, perhaps because the more targeted measures hinted towards a broader pivot on how the administration planned to implement its tariff agenda. But a hotter-than-expected CPI reading for January and a firm commitment from Chair Powell that policymakers were in no hurry to cut rates, helped to temporarily sour the mood by mid-week. Treasury yields across the curve briefly pushed higher only to completely retrace on Thursday, as President Trump’s threat of announcing further reciprocal tariffs showed no immediate action. The S&P 500 ended the week 1.6% higher, while Treasury yields were largely unchanged, with the 10-year currently sitting at 4.47% (Chart 1).
The steel and aluminum tariffs announced on Monday come just a week after Canada and Mexico were able to get a 30-day delay on the blanket 25% tariffs that were supposed to go into effect on February 1st. But unlike those tariffs, the administration has some historical precedence for the steel and aluminum tariffs, with President Trump having enacted similar measures back in 2018/19. For most countries, the previous tariffs had been lifted. However, this week’s announcement would reinstate the 25% tariff on steel and ups the tariff on aluminum to 25% (previously 10%), with no country exemptions.
The ratcheting up of trade tensions has come at particularly challenging time for policymakers, as the Fed’s fight to return price stability has hit a wall. The January CPI reading showed headline inflation rising at its fastest monthly pace in nearly a year and a half, while core inflation’s gain was the largest since March 2024 (Chart 2). Residual seasonality looks to be at least partially responsible for January’s uptick – as it was in the early months of last year. This appears to be a legacy issue stemming from the pandemic.
Historically, businesses tend to build in big price adjustments at the beginning of each year, which would normally be corrected for with appropriate seasonal factors. But during the COVID pandemic, firms were much faster to pass on price increases, distorting the seasonal patterns, and biasing the January inflation readings higher in recent years in financial news.
But it’s unlikely that residual seasonality is telling the whole story. Consumer spending remained incredibly strong through the second half of last year – averaging an impressive 3.6% annualized. Moreover, spending on both goods and services was very healthy in Q4, helping to explain the breadth of price pressures last month. While the January retail sales data point to a sharp slowing in spending, those figures were likely impacted by inclement weather and the California wildfires – suggesting some giveback in spending in February.
At this point, the Fed appears to have plenty of runway to maintain its current policy rate and wait for more clarity on the inflation front. This is unlikely to come with just the next few inflation readings, which means the Fed is on hold until at least the summer.
This Financial News report is provided by TD Economics. It is for informational and educational purposes only as of the date of writing and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this financial news report has been drawn from sources believed to be reliable but is not guaranteed to be accurate or complete. This report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise the TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered. Do you have any questions about your finances? As financial advisors in Cornelius NC, Naples FL, and Moultonborough NH we are happy to help.
To see more news reports, click here.
Financial News for the Week of February 7th, 2025
Financial News Highlights
- Tariffs on Canada and Mexico have been put on hold for one month, but a 10% tariff was imposed on imports from China in financial news.
- Companies have ramped up inventories ahead of tariffs, leading to a sharp increase in the trade deficit in December. Activity has eased off in the services sector, but continued to reaccelerate in manufacturing.
- Hiring has slowed in January, however, the labor market remains solid overall. Significant upward revisions to the fourth quarter figures suggest that job growth was stronger at the end of last year than previously thought.
Canada-Mexico Tariffs on Hold
This week was anything but boring for financial news. On Monday, an 11th-hour deal was reached to delay tariffs on Canada and Mexico for a month. However, while Canada and Mexico were spared, China was not, as an additional 10% tariff was imposed on all imports from the country.
The prospect of tariffs being imposed on North America in a month, or in April when the review of current trade policies is completed, looms large. Financial markets have largely recovered from their initial knee-jerk reaction to the tariff announcement, with the S&P 500 paring back losses by the end of the week. However, inflation expectations over the next two years have risen (Chart 1) while bond yields have declined. This points to investors’ concerns that tariffs will accelerate inflation and slow economic growth.
Businesses’ uncertainty about the looming tariffs were reflected in the trade data. The U.S. trade deficit widened sharply in December – the largest one-month increase since the early 1990s. Imports surged as companies rushed to ramp up inventories ahead of potential tariffs. Last month’s sharp increase in the trade deficit is likely temporary, but trade policy uncertainty will continue to affect trade flows throughout the year. Uncertainty about tariffs also clouds the outlook in the manufacturing sector, particularly in industries such as auto manufacturing (report). Even though the ISM manufacturing index has continued to improve in January, rising for the third consecutive month and finally moving into expansionary territory, supply chain disruptions could dent the sector’s nascent progress.
Activity in the services sector continued to expand robustly in January, although it dialed back a notch. The services sector is less exposed to trade than manufacturing, but it is not immune. The prices paid subcomponent remains elevated, and any supply chain disruptions and higher input prices could reignite inflationary pressure.
Additional inflationary impetus could also come from the labor market. Today’s employment report showed that the U.S. economy added 143k jobs in January. This is considerably less than December’s tally (+305k), but still a solid outturn, particularly when combined with a slight decline in the unemployment rate and an uptick in wage growth. Moreover, wildfires in Los Angeles and a cold weather spell nationwide could have also weighed on employment, suggesting a bounce-back next month could be in the cards. Lastly, revisions through the fourth quarter were notably higher, adding an extra 101k jobs to the previously reported figures and suggesting that hiring momentum was even stronger at the end of last year than previously thought (Chart 2).
With inflation progress having stalled in recent months, wage growth showing staying power and heightened uncertainties on how far the new administration will go on its policies, the Fed is likely to remain more cautious. Next week’s inflation report will likely show that the Fed’s patience is justified, as inflation remains persistently above the Fed’s 2% target.
This Financial News report is provided by TD Economics. It is for informational and educational purposes only as of the date of writing and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this financial news report has been drawn from sources believed to be reliable but is not guaranteed to be accurate or complete. This report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise the TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered. Do you have any questions about your finances? As financial advisors in Cornelius NC, Naples FL, and Moultonborough NH we are happy to help.
To see more news reports, click here.
Financial News for the Week of January 31st, 2025
Financial News Highlights
- The U.S. economy ended 2024 on solid footing, expanding at a 2.3% annualized pace. The consumer did the heavy lifting, with spending accelerating in the fourth quarter.
- The Fed’s preferred inflation gauge, the core PCE deflator, continued to hover somewhat above target in December, growing at 2.8% year-on-year. But trends over the past few months suggest further cooling ahead.
- Major action may come on the trade policy front as early as this weekend, with President Trump reiterating his intentions to impose tariffs on Canada and Mexico – America’s largest trading partners.
U.S. – Stock Market Rowdy, Economy Steady
The last week of January began on a soft note for stock markets in financial news. As it became apparent that a low-cost Chinese artificial intelligence start-up (DeepSeek) could threaten the dominance of American rivals, the valuations of several large tech firms took a hit, weighing on major indexes. Some recovery ensued later in the week, with the S&P 500 and tech-heavy NASDAQ nearly erasing the losses from last week’s close (at the time of writing). In contrast to the rowdiness of the stock market, signals out of the economy continued to point to steadiness.
The first read on fourth quarter GDP showed that the U.S. economy ended last year on a solid footing as it grew at 2.3% quarter-on-quarter annualized. The consumer did the heavy lifting, offsetting a notable drag from gross fixed private investment (Chart 1). Goods spending carried the torch once again, propelled forward by a double-digit increase in durable goods, but services also notched a mild acceleration. Meanwhile, within the softness of the broad private investment category, residential investment was a bright spot for a change, lifted by a double-digit gain in housing starts last quarter. Looking at the big picture, the fact that the economy essentially sustained 2023’s pace through 2024, despite the still elevated interest rate environment, is an impressive accomplishment.
Friday morning’s monthly PCE report provided some more detail with respect to consumption and inflation trends at the turn of the year. The handoff to the start of 2025 is solid, as real spending growth remained robust in December, growing at nearly 5% annualized. This, as strength in services helped offset some cooldown in goods spending from the double-digit gain in the month prior. Additionally, the Fed’s preferred inflation gauge – core PCE – held at 2.8% in year-on-year terms. The fact that the 3-month and 6-month annualized rate of change in core PCE inflation gravitated lower toward the target, was a welcome development (Chart 2).
With inflation still somewhat elevated (though appearing to head in the right direction) and the economy remaining on solid footing, the Fed can afford to take a cautious approach to further loosening monetary policy. The FOMC left the policy rate unchanged at this week’s meeting – a move that was widely anticipated. Fed Chair Powell acknowledged that “we don’t need to be in a hurry to adjust our policy stance”, while nodding to the uncertainties and the risks related to major policy changes out of Washington, such as on trade policy. Powell reiterated a wait-and-see approach, stating that they’d need any new policy changes to be articulated first, before assessing their impacts on the economy in financial news.
Major action on the trade front may come as early as this weekend, with President Trump reiterating his intention to impose 25% tariffs on Mexico and Canada on February 1st. There’s still a possibility that cooler heads will prevail, as President Trump’s top pick for commerce secretary suggested that tariffs could be avoided if swift action was taken on the border issues. Still, the deadline is fast approaching and any trade skirmishes with its neighbors will be problematic – the two countries are America’s largest trading partners and are deeply integrated in supply chains.
This Financial News report is provided by TD Economics. It is for informational and educational purposes only as of the date of writing and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this financial news report has been drawn from sources believed to be reliable but is not guaranteed to be accurate or complete. This report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise the TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered. Do you have any questions about your finances? As financial advisors in Cornelius NC, Naples FL, and Moultonborough NH we are happy to help.
To see more news reports, click here.
Financial News for the Week of January 3rd, 2025
Financial News Highlights
- The Federal Reserve cut its policy rate by 25 basis points to 4.25-4.5%, as expected in financial news. But, updated forecasts showed that FOMC members now expect inflation to be a bit hotter next year, and as a result expect to make only 50 basis points in cuts next year, down from 100 bps in September.
- Economic growth was revised upwards in the third quarter. Real GDP rose 3.1%, up from 2.8% previously.
- There was also good news on the Fed’s preferred inflation gauge. The Core PCE Deflator held steady at 2.8% in year-on-year terms in November, but cooled noticeably on a month-to-month basis.
Awaiting the Changing of the Guard
Turning the page on 2024, we eased into the new year this week with limited updates on the state of the economy in financial news. For that reason, the attention of financial markets was more attuned to developments in Washington as the 119th session of Congress kicked off. However, the holiday period continued to weigh on trading volumes overall, with the S&P falling 1.1% on the week, while U.S. Treasury yields declined modestly.
Economic data releases this week showed that housing market activity continued to gradually recover from its current subdued state. Pending home sales improved for a fourth consecutive month in November, although gains have moderated recently as rates ticked higher through the fourth quarter. With mortgage rates remaining near 7% (Chart 1) and the Federal Reserve shifting into a more cautionary stance in 2025, the housing market’s recovery is expected to remain gradual this year (see report). As of the time of writing, market pricing implies a nearly 90% probability of the Fed pausing at their next meeting at the end of the month, but the ultimate trajectory of monetary policy this year will likely depend on the fiscal policies implemented by the incoming administration and the impact they have on the economy.
Shifting over to D.C., the federal government continues to be funded by the continuing resolution passed by Congress on December 20th, which will remain in effect until March 14th. This means the twelve appropriation bills for the current fiscal year will be one of the first priorities of the new session of Congress which commenced this week. In addition, the debt ceiling suspension that had been in place since June 2023 expired with the start of the new year. The U.S. Treasury put out a statement last week stating that they anticipated that the debt ceiling would become binding in the next 2-3 weeks, at which time they would begin taking extraordinary measures to avoid defaulting on their fiscal obligations. These measures would likely last until the summer (as they did when the debt ceiling was last hit in early 2023 – Chart 2), but the timely implementation of measures to suspend, raise, or eliminate the debt ceiling will be of paramount importance in the first half of 2025.
With a full legislative agenda already taking form, the first order of business for the new Congressional session this week was electing a new Speaker of the House, with a vote expected Friday afternoon. Looking ahead, Senate confirmation hearings for President-elect Trump’s cabinet nominees are likely to begin in the coming weeks, with the much-anticipated presidential inauguration day set for two weeks from Monday.
On the economic front, we’ll return to a more normal schedule of data releases next week, with the December employment report expected to show 153k new jobs added for the month – down from 227k in November. FOMC December meeting minutes will also be released next Wednesday, which will provide further insights on the Fed’s updated projections. All-in-all, 2025 already looks set to be an eventful year.
This Financial News report is provided by TD Economics. It is for informational and educational purposes only as of the date of writing and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this financial news report has been drawn from sources believed to be reliable but is not guaranteed to be accurate or complete. This report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise the TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered. Do you have any questions about your finances? As financial advisors in Cornelius NC, Naples FL, and Moultonborough NH we are happy to help.
To see more news reports, click here.