Economy

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At 05:40 a.m. ET, Dow E-minis were up 85 points, or 0.20%, S&P 500 E-minis were up 16.25 points, or 0.27%, and Nasdaq 100 E-minis were up 85.25 points, or 0.40%.Wall Street had a dour start to the new year, with all three major indexes erasing early gains to close lower for a fourth straight session on Thursday, bucking a historical trend where markets rally in the last five sessions of December and the first two sessions of January. The benchmark S&P 500 and blue-chip Dow are on track for weekly declines of over 1% each, while the tech-heavy Nasdaq has logged a drop of about 2%. Technology stocks that have led much of the rally over the past two years took the heaviest beating.Analysts have pointed to uncertainty around the policies incoming U.S. President Donald Trump’s administration could implement, given that his Republican party also dominates Congress. The newly-elected Congress is set to commence its first session on Friday and Trump will be sworn in on Jan. 20.Trump’s proposals to lower corporate taxes, ease regulations, impose tariffs and clamp down on illegal immigration could boost corporate profitability and the economy, but they also threaten to spur inflation and impede the pace of monetary easing.The yield on the 10-year Treasury note is pinned near the psychological level of 4.5% and according to the CME Group’s (NASDAQ:CME) FedWatch Tool, traders see the Federal Reserve lowering interest rates by about 50 basis points this year as data continues to signal resilience in the economy.Later in the day, markets will parse ISM’s report on manufacturing activity for December, ahead of a key employment figure due next week.The first among policymakers to comment on the economic outlook this year, Richmond Fed President Thomas Barkin’s remarks are also on tap.Stretched equity valuations have been a concern for investors but most brokerages expect another year of gains for U.S. stocks, propelled by strong corporate performance. Quarterly earnings reports due later in the month will test Wall Street’s more than two-year bull run.Tesla (NASDAQ:TSLA) added 1.1% in premarket trading, after sliding over 6% in the previous session on a disappointing annual quarterly deliveries report.U.S. Steel slid 8.2% after sources said President Joe Biden had decided to officially block Nippon Steel’s proposed $14.9 billion purchase of the company, dealing a probably fatal blow to the contentious merger plan.Block rose 2.8% after brokerage Raymond (NS:RYMD) James raised its rating to “outperform” from “market perform”.U.S. automobile sales for December, expected later in the day, are also in focus.Trading volumes are expected to be subdued following the New Year’s holiday on Wednesday. More

SAN FRANCISCO (Reuters) – Auto and tech giants showing off their latest innovations at the CES trade show in Las Vegas next week can expect a barrage of questions on a topic that is usually not central to the consumer-focused event: tariffs.The gathering is one of the largest of manufacturers, analysts and suppliers in the United States and comes days before the inauguration of President-elect Donald Trump, who has pledged big tariffs on imports from Canada, Mexico, China and other U.S. trading partners. This has sparked concerns about spiraling costs for businesses as well as consumers. “This will be a hot topic,” said strategy consultant Deborah Weinswig, CEO of Coresight Research, who said the proposed tariffs have come up in almost every conversation she has had with clients ahead of CES. “This is going to be something that definitely senior leadership is going to have to address.” CES 2025, formerly known as the Consumer Electronics Show, runs Jan. 7-10 and is used to debut products ranging from new automotive technology to quirky gadgets, as well showing new ways to use artificial intelligence. Among the highlights this year is a keynote speech from AI chip giant Nvidia (NASDAQ:NVDA)’s celebrity CEO, Jensen Huang. While AI will still be the buzzword on the show floor, the issue of tariffs will be top-of-mind in policy sessions, press conferences and on the sidelines. Companies may be asked about changing suppliers and moving production to the United States to mitigate supply-chain disruptions – moves that take time and are expensive, analysts have said.   Honda (NYSE:HMC), for instance, sends 80% of its Mexican output to the U.S. market. It has warned it would have to think about shifting production if the United States were to impose permanent tariffs on vehicles imported from the country.Nearly half of new cars sold in the U.S. as well as a significant share of parts on the rest are made elsewhere, according to estimates from Edmunds. European and American carmakers could lose up to 17% of their combined annual core profits if the U.S. imposes import tariffs on Europe, Mexico and Canada, according to an S&P Global report. PLANNING IN HYPER MODEIn addition to tariffs, Trump has said he plans to begin rescinding policies meant to promote the adoption of EVs.Many suppliers, already struggling because of weaker than expected EV demand, are operating on “razor-thin” margins and will have to radically adapt their cost structure this year in the face of potential tariffs, said Felix Stellmaszek, global leader of the automotive and mobility sector at Boston Consulting Group.”Add to this supply-chain uncertainties and labor shortages and it’s clear that many suppliers are in dire straits,” he said. “The scenario planning is in hyper mode.” Between responding to potential tariffs, automakers and their suppliers – including Honda, Toyota (NYSE:TM), Bosch (NS:BOSH), and Continental – are expected to provide updates on their race to develop cars with software-driven enhancements, self-driving technology and AI that makes vehicles easier and safer to drive.  Among the speakers will be Delta Air Lines (NYSE:DAL) CEO Ed Bastian, Volvo (OTC:VLVLY) Group CEO Martin Lundstedt, Panasonic (OTC:PCRFY) CEO Yuki Kusumi, and X Corp CEO Linda Yaccarino. Every industry is likely to face questions about tariffs. “‘How are companies going to work together from a supply-chain perspective?” said consultant Weinswig. “How are we going to mitigate rising costs? Can technology solve this? There’s still so much that’s not known, we’ve seen that everyone’s trying to figure out every possible scenario.”  More

2025 has kicked off how 2024 ended: stocks are having a wobble and the dollar remains in charge as investors bet that Fed rate cuts will be few and far between this year. Data on Thursday supported that view, with the number of Americans filing new applications for unemployment benefits dropping to an eight-month low last week.A robust labor market should stamp out any near term expectations for rate cuts from the Fed, with lower borrowing costs now conditional on a worsening employment picture and softer inflation. The chances of a cut at the Fed’s January meeting stand at about 11%.With U.S. rates expected to stay higher for longer, it’s the dollar that reigns supreme.The dollar index, albeit a touch softer on Friday, remains near its highest level in over two years, pushing the pound to multi-month lows and the euro ever closer towards parity.On Thursday, the single currency fell to its lowest in over two years at $1.0225.Europe remains unloved, for now, with the threat of U.S. import tariffs further weighing on sentiment.The fourth quarter of 2024 marked the worst quarterly showing in more than two years for the pan-European STOXX 600. And it’s not just Europe that is showing signs of stress. Wall Street is wobbling too. The S&P 500 couldn’t hold onto gains on Thursday and fell for a fifth straight trading session, its longest losing streak since mid-April. The Nasdaq Composite also fell for a fifth straight day. Wall St futures are higher before the bell on Friday as they look to end the holiday-disrupted week in the green before a big week next week, which include December’s nonfarm payrolls report and flash inflation data from the euro zone. Key developments that should provide more direction to U.S. markets later on Friday: * ISM Manufacturing PMI* EIA Natural Gas Storage Change More

WASHINGTON (Reuters) – Democrat Hakeem Jeffries could be poised to wield more power than a minority leader typically enjoys in the U.S. House of Representatives, with President-elect Donald Trump’s fractious Republicans holding a thin majority.Over the past two years of Republican control, Jeffries has kept some grip on power. Republican Speaker Mike Johnson has turned to him more than a dozen times to provide Democratic votes to pass critical legislation, including in May when Jeffries helped Johnson hold off an effort by hardline Republicans to end his speakership.Democratic unity is expected to be on full display on Friday when the new 219-215 Republican-controlled chamber votes on whether to keep Johnson in the speaker’s chair. Republicans required multiple rounds of voting in January 2023 to elect former Speaker Kevin McCarthy and again in October of that year to pick Johnson once they ousted McCarthy.Throughout those episodes, the minority Democrats voted again and again for Jeffries, a 54-year-old New Yorker, to lead them.”I think we have a lot more leverage there than we had” in 2017, said Democratic Representative Don Beyer in an interview last month. That year marked the start of Trump’s first term in office, when his Republicans also controlled the House, but by a 40-seat margin.To be sure, Jeffries’ powers, and those of Democratic Senate Minority Leader Chuck Schumer, will be limited. Republicans will try to pass much of Trump’s legislative agenda on party-line votes, bypassing Senate rules that require 60 of the 100 members to agree on most legislation, as Democrats did during President Joe Biden’s first two years in office.In the House, Jeffries’ powers mainly will be limited to exploiting divisions among Republicans that necessitate Democratic votes to pass legislation.It is a tactic Jeffries deployed more than a dozen times since Republicans took control of the House in January 2023 on bills ranging from government funding to an $895 billion bill authorizing military programs and emergency aid for Ukraine’s war effort against Russia.The upcoming battle over Trump’s push to renew expiring tax cuts, which were enacted in 2017 and aimed mainly at corporations and the wealthy, gives Democrats hope that Jeffries can win concessions. These include an expanded child tax credit for low-income people and repeal of a cap on deductions for state and local taxes.”We will work to find bipartisan common ground in a manner consistent with our values but at the same time push back whenever necessary against far-right extremism that will hurt the American people,” Jeffries told reporters following November’s elections.He and his lieutenants have sketched out additional areas of possible bipartisan compromise, which Jeffries said includes protecting people brought to the United States illegally when they were children from deportation, revamping U.S. asylum law and updating the visa system for immigrant farm workers.’CAN’T BE STEAMROLLED’What remains to be seen is whether Jeffries will manage to forge a working relationship with Trump. The two New York City natives collaborated during Trump’s 2017-2021 term on criminal justice reforms. But since then, Washington partisanship has only deepened and former Speaker Nancy Pelosi, a Democrat, had a contentious relationship with Trump.Last month, when Trump tried to force passage of a controversial debt limit increase as part of a retooled stopgap funding bill, Democrats balked and were joined by about three dozen disgruntled Republicans.”We showed that we can’t be steamrolled,” veteran Democratic Representative Debbie Dingell said. The chaos raised questions over whether Trump had needlessly expended post-election capital before his presidency had even begun and now might have to lower his sights.”I don’t think so. He’s still strong. People still love him back home. That’s all that really matters,” Republican Representative Tim Burchett of Tennessee told reporters. More

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BERLIN (Reuters) -The number of people out of work in Germany rose less than expected in December, federal labour office figures showed on Friday. The office said the number of unemployed increased by 10,000 in seasonally adjusted terms to 2.87 million. Analysts polled by Reuters had expected that figure to rise by 15,000. “The winter break on the labour market begins in December. As a result, unemployment and underemployment increased in December, as is usual for this month,” said labour office head Andrea Nahles.Due to the subdued economic outlook, the number of unemployed is expected to continue to rise this year, exceeding the 3 million mark for the first time in 10 years at the beginning of 2025.The average unemployment rate for the year edged higher to 6.0% in 2024 from 5.7% in 2023, according to the office.”Looking back, the ongoing economic downturn in 2024 has left increasingly deep marks on the labour market,” said Nahles. The seasonally adjusted unemployment rate remained stable at 6.1%.”That’s good news, but it’s only a matter of time before Germany’s unemployment rate drifts higher again,” said Claus Vistesen, chief euro zone economist at Pantheon Macroeconomics.There were 654,000 job openings in December, 59,000 fewer than a year ago, showing a slowdown in labour demand, the federal labour office said.Relevant early labour market indicators do not suggest any improvement for the time being, said Marc Schattenberg, economist at Deutsche Bank (ETR:DBKGn) Research.He added that after reaching a new high of 46.1 million on average in 2024, the number of people in employment is likely to stagnate at best this year.“Even a slight decline cannot be ruled out,” Schattenberg said. More

Data from LSEG Lipper indicated that U.S. equity funds received just $490 million worth of investments during the week, significantly smaller than the $20.46 billion in net purchases in the week before.Last week, concerns over the outlook for mega-cap technology stocks increased as the U.S. 10-year Treasury yield climbed to 4.641%, its highest since May 2. Despite impressive annual gains in 2024, with the Nasdaq Composite, S&P 500, and Dow Jones Industrial Average rising 28.64%, 23.31%, and 12.88% respectively, all three indexes fell by over 1% this week as investors across sectors, took profits.Investors bought U.S. large-cap and multi-cap funds of $5.43 billion and $844 million, respectively, but in contrast, pulled $1.67 billion and $485 million, respectively out of small-cap and mid-cap funds.Sectoral funds witnessed a fifth successive week of outflow, valued at a net 2.55 billion. Industrials, tech and healthcare sectors, with $519 million, $385 million and $358 million in net selling, led outflows.Concurrently, investors added a robust $54.59 billion worth of safer money market funds, the largest weekly net purchase in four weeks.U.S. bond funds were under selling pressure for a third consecutive week, with investors divesting a net $493 million worth of these funds.U.S. short-to-intermediate government & treasury funds segment, however, bucked the trend as it gained a net $1.35 billion worth of inflows, the highest in three months. More