Stocks will be digesting the tariffs announcements after a strong start to the year. In January, the S&P 500 (^GSPC) rose 2.7% while the Nasdaq Composite (^IXIC) rose more than 1.6%. The Dow Jones Industrial Average (^DJI) led the gains, rising 4.7%.
In the week ahead, investors will parse the latest developments in Trump’s tariff strategy, the January jobs report, and an onslaught of corporate reports. Updates on job openings, as well as activity in the services and manufacturing sectors, will also be on the schedule.
Tariff reaction will be at the forefront of the market narrative in the week ahead. The duties on all three countries will be fully in force by Tuesday, February 4th, according to the order signed by Trump Saturday afternoon in Florida. Many economists have argued that tariffs could stoke inflation.
A stock market rally cooled off to end the week as White House press secretary Karoline Leavitt on Friday afternoon outlined the plans for imposing tariffs.
This set the stage for what could come from the market as investors digest Trump’s tariff promises coming to fruition.
Evercore ISI chief strategist for international affairs and public policy Sarah Bianci told Yahoo Finance Trump’s tariffs would “grab the market’s attention.” Bianchi added that Trump following through with the extent of tariffs he had initially threatened “may be further” than market participants had been expecting to this point.
The week ahead will bring several key updates for the Fed on the employment side of its mandate. The January jobs report, due out Friday morning, is expected to show the US labor market added 150,000 jobs in the month, down from the 256,000 seen in December. Meanwhile, the unemployment rate is expected to hold steady at 4.1%. The report will also include revisions to labor data from the past year.
“We suspect the January jobs report will continue to indicate the labor market has softened over the past year, but not to an alarming degree,” Wells Fargo’s economics team led by Jay Bryson wrote in a weekly note to clients Friday.
While the labor market has held up for now, with inflation moving slowly toward the Fed’s target, some on Wall Street believe signs of significant slowing would be the most likely catalyst to prompt the central bank to resume its rate-cutting cycle.
“We think the unemployment rate is probably the single most important macro data point you’re going to get every month,” Citi head of US equity trading strategy Stuart Kaiser told Yahoo Finance. “If you see a significant uptick in the unemployment rate, that potentially puts the Fed under pressure and puts the market under pressure as well.”
Less than halfway through the reporting period, the S&P 500 is currently pacing for year-over-year earnings growth of 13.2% for the fourth quarter, which would mark the fastest rate of growth in three years for the benchmark index. This is higher than the 11.8% growth consensus had expected on Dec. 31, per FactSet data.
And FactSet senior earnings analyst John Butters points out this reporting season has been a particularly strong one for companies that are surprising Wall Street to the upside with their earnings per share numbers. Analyzing the two days leading into and following a report, companies that beat Wall Street’s earnings expectations have seen their stocks rise 1.5% on average. This is above the five-year average of a 1% rise for companies that top earnings estimates.
And it’s not just this quarter’s earnings surprising, either. Deutsche Bank chief global strategist Binky Chadha pointed out in a note to clients that at this point in the quarter, earnings estimates would usually have been cut 1.3%. Instead, they’ve only been trimmed by 0.6%.
In other words, while noise about tariffs, inflation, and the overall path of monetary policy continues to dominate the discussion, the strong trend in earnings continues to be what’s keeping Wall Street strategists bullish about the market outlook.
“The most steady part of this bull market has been … those earnings trends. Those forward earnings estimates every week are making new highs,” Truist co-chief investment officer Keith Lerner told Yahoo Finance. “All in all, we think the bull market trend is intact, supported by these earnings that are somewhat still underappreciated.”
Another bullish sign for earnings may soon be flashing green too. On Tuesday, the Institute for Supply Management will release its ISM Manufacturing PMI. The reading has shown the sector in contraction for more than two years.
Bank of America US economist Aditya Bhave believes the tide may be turning for manufacturing, though.
“The manufacturing recession might be over, and we think the ISM manufacturing index is likely to break above 50 in January,” Bhave wrote in a note to clients on Friday.
This could be bullish for stocks, Fundstrat head of research Tom Lee recently said in Yahoo Finance’s Chartbook.
“To me, the most important chart to watch is the ISM manufacturing turning up in 2025,” Lee said. “This series has been below 50 for 26 months now, the longest stretch since 1989-1991, and we think [it] signals an acceleration of cyclical [earnings] growth in 2025.”
As Lee’s chart shows, when ISM’s manufacturing PMI picks up, earnings usually follow.
Monday
Economic data: S&P Global US manufacturing PMI, January final (50.1 expected, 50.1 previously); Construction spending, month-over-month, December (0.2% expected, 0% prior); ISM manufacturing, January (49.3 expected, 49.3 prior)
Earnings: The Clorox Company (CLX), Palantir (PLTR), Tyson (TSN)
Tuesday
Economic data: Job openings, December (8.01 million previously); Factory orders, December (+0.5% expected, -0.4% previously); Durable goods orders, December final (-2.2% previously), Capital Goods orders nondefense, excluding air, December final (+0.3% previously)
Earnings: Alphabet (GOOGL,GOOG), AMD (AMD), Amgen (AMGN), Apollo (APO), Chipotle (CMG), Electronic Arts (EA), Enphase (ENPH), Estée Lauder (EL), Ferrari (RACE), Juniper Networks (JNPR), Merck (MRK), PayPal (PYPL), PepsiCo (PEP), Pfizer (PFE), Snap (SNAP), Spotify (SPOT)
Wednesday
Economic data: MBA mortgage applications, week ending Jan. 31 (-2% prior); ADP Private Payrolls, December (+153,000 expected, +111,000 previously); S&P Global US services PMI, January final (52.8 prior); S&P Global US composite PMI, January final (52.4 prior); ISM services index, January final (54.5 expected, 54.1 prior)
Earnings: Disney (DIS), Aflac (AFL), Arm Holdings (ARM), Aurora Cannabis (ACB), Boston Scientific (BSX), Ford (F), Novo Nordisk (NVO), Qualcomm (QCOM), Toyota (TM), Uber (UBER), Viking Therapeutics (VKTX)
Thursday
Economic data: Challenger jobs cuts, year-over-year, January (+11.4% previously); Initial jobless claims, week ending Feb. 1 (207,000 previously)
Earnings: Amazon (AMZN), Eli Lilly (LLY), Affirm (AFRM), e.lf. Beauty (ELF), Bristol Myers Squibb (BMY), ConocoPhillips (COP), Hershey (HSY), Peloton (PTON), Pinterest (PINS), Phillip Morris International (PM), Roblox (RBLX), Tapestry (TPR), Yum! Brands (YUM)
Friday
Economic calendar: Nonfarm payrolls, January (+150,000 expected, +256,000 previously); Unemployment rate, January (4.1% expected, 4.1% previously); Average hourly earnings, month-over-month, January (+0.3% expected, +0.3% previously); Average hourly earnings, year-over-year, January (+3.8% expected, +3.9% previously); Average weekly hours worked, January (34.3 expected, 34.3 previously); Labor force participation rate, January (62.5% previously); Annual revisions to the employment establishment survey expected; University of Michigan consumer sentiment survey, February preliminary (74 prior)
Earnings: Canopy Growth (CGC), Newell Brands (NWL)
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer
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