The US equity and bond markets enter into the final two holiday shortened trading weeks with volumes expected to be light as investors depart and traders have closed their books. The 24th will be a 1/2 day of trading, followed by a full day of market closure on the 25th (Christmas) and Jan 1st, 2026 (New Years). Earnings reports are light but economic reports continue as government agencies play catch up following the recent shutdown.
The last full week of trading in 2025 will mark the return of two important economic reports including Non-Farm Payrolls (Tues) and the CPI (Thurs), both of which have been delayed by the government shutdown. The NFP report is expected to be volatile as October will reflect job losses associated with the government shutdown while the November ADP private employment report was negative in November, suggesting the 40K estimate may be overstated. CPI reports have been trending higher since bottoming at 2.3% in April, recently touching 3.0% in Sept., as tariffs have fed through to higher goods prices.
All eyes on the FOMC this week as it meets on Tues/Wed to discuss what is expected to be an additional 25bps rate cut to Fed funds (3.625% mid point), which will be announced Wed. afternoon. The Fed will also release its Summary of Economic Projections which will provide its thoughts on future rate cuts through 2026 as traders are pricing in 2-3 more rate cuts in 2026 (CME) on the belief that Hassert will be the new Fed Chair and pursue dovish policy.
Welcome to December - a historically strong month for equity returns that will seek to add to the SPX YTD gain of ~ 18%. If so, this will mark 6 of the last 7 years that the SPX has gained in excess of 18%...a remarkable run given the average return of the SPX is ~10% since 1957.
They're back...meaning government workers, as well as missing pieces of economic data, including the Non Farm payrolls report for Sept. on Thursday. Monthly job adds data has been downbeat over recent reports with May (19K), June (-13K), July (79K), and August (22K) averaging 27K monthly adds which contrasts with the Jan - April average of 123K job adds.
Earnings season slows for the SPX with only 8 companies set to report with CSCO and AMAT providing further commentary on the tech/AI trade (along with CRWV, not in SPX) while DIS and IPG will speak to consumer strength in media and advertising. SPX companies continue to beat eps estimates with 91% besting consensus, better than the 5-year average of 78% and the highest since Q321, while earnings are expected to advance 13.1% y/y, marking the 4th consecutive double-digit earnings gain and the 9th consecutive y/y earnings gain for the SPX (Factset).