Aurelia Butler

NEW YORK (Reuters) – The stock market faces its first major test of the year in the coming week, with investors counting on the U.S. jobs report to show a stable but not overheated economy that underpins expectations for equity gains in 2025.Stocks wobbled at the end of December and the start of January, cooling off after a torrid run. The benchmark S&P 500 closed 2024 with a 23% rise and posted its biggest two-year gain since 1997-1998.Prospects for a third straight standout year hinge in part on the strength of the economy, with labor market data among the most important reads into the economy’s health. The data could also help clarify the Federal Reserve’s interest rate plans after the central bank last month rattled markets by reducing its projected rate cuts for 2025.”Investors are going to want to see confirmation that labor trends remain solid, which means the economic outlook probably remains firm,” said Anthony Saglimbene, chief market strategist at Ameriprise Financial (NYSE:AMP).”Any kind of data that suggests things are weakening a little bit more than expected I think could create volatility,” Saglimbene said.Investors enter the year generally upbeat about the U.S. economy. A Natixis Investment Managers survey conducted at the end of last year found 73% of institutional investors said the U.S. will avoid a recession in 2025. Labor market data has been volatile in recent months following aerospace industry strikes and hurricanes. November data showed growth of 227,000 jobs that rebounded from a tepid rise in October.The three-month average gain of 138,000 “suggests that hiring continues to slow gradually,” Capital Economics analysts said in a note.The report for December, due out on Jan 10, is expected to show growth of 150,000 jobs with the unemployment rate at 4.2%, according to a Reuters poll of economists.Following the prior two reports, “this is going to be probably the first clean read of what is the underlying trend in the labor market,” said Angelo Kourkafas, senior investment strategist at Edward Jones.Investors are also wary of the jobs report revealing an overly strong economy, with a revival of inflation seen as one of the key risks to markets early in the year.The Fed at its December meeting lifted its forecast for expected inflation in 2025, paving the way for higher interest rates than it previously forecast.After lowering its benchmark rate at three straight meetings, the Fed is expected to pause its easing cycle when it next meets at the end of January before making further cuts of about 50 basis points over the rest of the year.For the jobs report, the market is “looking for that Goldilocks number — neither too hot, nor too cold,” Kourkafas said.OTHER EMPLOYMENT DATAWhile the payrolls data will be the most closely followed release, the coming week brings other market-sensitive employment figures, as well as reports on factory orders and the services sector.Despite a strong 2024, stocks were weak in December, with the S&P 500 falling 2.5%. December had only five days with more stocks in the index gaining as opposed to declining, the lowest share of such relatively positive days for any month going back to 1990, according to Bespoke Investment Group.Following the end-of-year holiday period, “next week probably ushers in more robust volumes, which would certainly be a better indication of directionality for the market,” said Art Hogan, chief market strategist at B. Riley Wealth.”A solid jobs report would certainly help turn things around in this market that has otherwise been pretty soft to end the year and start the new year,” Hogan said.Wall St Week Ahead runs every Friday.  For the daily stock market report, please click [.N]   More

Investment in AI has surged since OpenAI launched ChatGPT in 2022, as companies across sectors seek to integrate artificial intelligence into their products and services.AI requires enormous computing power, pushing demand for specialized data centers that enable tech companies to link thousands of chips together in clusters.Microsoft (NASDAQ:MSFT) has been investing billions to enhance its AI infrastructure and broaden its data-center network.Analysts expect Microsoft’s fiscal 2025 capital expenditure including capital leases to be $84.24 billion, according to Visible Alpha. The company’s capital expenditure in the first quarter of fiscal 2025 rose 5.3% to $20 billion.As OpenAI’s primary backer, the tech giant is considered a leading contender among Big Tech companies in the AI race due to its exclusive partnership with the AI chatbot maker. More than half of Microsoft’s $80 billion investment will be in the United States, Vice Chair and President Brad Smith said in the blog post. “Today, the United States leads the global AI race thanks to the investment of private capital and innovations by American companies of all sizes, from dynamic start-ups to well-established enterprises,” Smith said. More

(Reuters) – Federal Reserve Governor Adriana Kugler said on Friday the U.S. central bank is uncertain about what the economy will deliver in 2025 and will let upcoming economic data drive the course of monetary policy.In light of Fed forecasts last month for fewer interest rate cuts in 2025, “there is a view that we can take our time, to slow down” and be more “gradual” while watching the data to see if sticky inflation pressures start to ease again, Kugler said in a CNBC interview. If the resilient job market starts to lose steam, however, “we would be ready to act in a different direction” with monetary policy, she said. “We’re always responding” to what happens in the economy “and seeing what is happening in front of us,” the official added.In the interview, the central banker said the economy is in a good place and while the job market has cooled, it remains resilient with a still historically low unemployment rate.Asked how she expects the policies of the incoming Trump administration to affect the economy, Kugler noted there are many moving pieces, making it hard to say how things will play out.Kugler’s comments on TV were her first public remarks since the central bank’s most recent policy meeting, and were among the first made by a central banker as 2025 begins. At the Fed’s mid-December Federal Open Market Committee meeting, officials lowered by a quarter percentage point their interest rate target range to between 4.25% and 4.5%. At the meeting, policymakers pulled back on rate cut estimates in 2025 while raising projections of where inflation would stand.For some, the change in outlook called into question why the Fed had cut rates at all given how long officials expect it will be before they hit their 2% inflation target. The new year brings considerable uncertainty for the Fed with the return of Donald Trump to the presidency. The president-elect campaigned on a platform of heavy trade tariffs and deportations, which most economists believe is a recipe to reignite inflation. But officials have been cautious in reacting to the election outcome given a lack of details on what will be implemented and how.”There is a wide set of scenarios and I think everybody’s considering that wide set of scenarios,” Kugler said. Earlier on Friday, Richmond Fed President Thomas Barkin said that since tariffs could be implemented in many ways, “uncertainty should come down as policies are finalized, although it’s easy to imagine an extended period of back and forth” as elected leaders hash out the policy agenda. “I see more risk on the inflation side,” Barkin added, while noting the Fed is “well-positioned” on the policy front for whatever the economy sends its way.She signaled a reluctance to further ease policy. “I put myself in the camp of wanting to stay restrictive for longer as opposed to the other school, which would be ‘we’re done, so why not take rates down to neutral,'” she said. More

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WASHINGTON (Reuters) – A U.S. bank regulator told banks to pause dabbling directly in crypto in 2022 and 2023, but did not order them to stop providing banking services to crypto companies contrary to industry complaints of widespread “debanking,” according to documents released on Friday. A judge ordered the Federal Deposit Insurance Corporation to provide versions of supervisory “pause letters” it sent to unidentified banks after History Associates Incorporated, a research firm hired by crypto exchange Coinbase (NASDAQ:COIN), sued the agency to release them.The FDIC first released the letters in December but was ordered by the judge to resubmit them with more “nuanced redactions.” The new batch of 25 letters includes two additional letters sent to unidentified banks that were not included in the original FDIC submission.The litigation is part of a campaign by Coinbase to expose what it and other crypto companies say has been a concerted effort on the part of U.S. bank supervisors to choke off crypto companies from the traditional financial system.Coinbase’s chief legal officer, Paul Grewel, said in a post on X Friday that the less redacted letters show a “coordinated effort to stop a wide variety of crypto activity” and called for further investigation by Congress.In a bid to combat those claims, the FDIC also on Friday published a 2022 internal memo detailing how supervisors should assess queries from lenders looking to directly deal in crypto assets, versus offering banking services to crypto companies. Together, the documents provide a rare glimpse into the confidential bank supervisory process. They suggest that while FDIC examiners have been cautious towards the crypto sector, which has been beset by scams, bankruptcies and volatility, they did not order banks to entirely cut off the crypto sector. The documents are being released weeks before President-elect Donald Trump’s incoming administration is expected to outline a broad crypto policy overhaul. Trump is expected to issue an executive order directing bank regulators to go easier on the sector, potentially as early as his Jan. 20 inauguration.Several of the FDIC letters show staff directed banks to either pause entering crypto initiatives or refrain from further expanding client crypto services. In others, the FDIC required banks to answer detailed questions before proceeding further with crypto ventures. The internal memo, meanwhile, distinguishes between a bank engaging directly in crypto activities, like holding crypto assets in custody, and offering traditional banking services for crypto clients, like lending and providing deposit accounts. The first category requires stricter scrutiny, it says.The memo echoes comments made in December by FDIC Chairman Martin Gruenberg, who told reporters the agency does not “debank” crypto firms in terms of access to bank accounts, but direct crypto engagement by banks is a “subject of supervisory attention.””Crypto-related activities may pose significant safety and soundness and consumer protection risks, as well as financial stability concerns,” the memo notes, adding such risks are still “evolving.” More