FX168 Financial News Agency (North America) reported that in the first week of 2025, the US stock market has been in free fall.

During the five trading sessions last week, the S&P 500 Index fell by more than 1.5%, while the Nasdaq Composite Index declined by nearly 2%. Meanwhile, the Dow Jones Industrial Average dropped by about 1.5%.

This week, a series of key labor market data will greet investors, with the Department of Labor's December employment report being the most important release scheduled for Friday morning. Updates on job vacancies and private wage growth, as well as readings on service sector activity, are also planned.

Before the Federal Reserve's next meeting on January 30-31, this week will provide a final snapshot of the labor market.

In corporate news, investors will be looking for important announcements from technology companies like NVIDIA (NVDA) during the Consumer Electronics Show. At the same time, Delta (DAL) and Constellation Brands (STZ) are expected to report quarterly results.

(Image source: finance.yahoo)

Exploring the Outlook for the Labor Market

The labor market is cooling in 2024, but the Federal Reserve seems confident about its trajectory.

At the final annual press conference on December 18 last year, Federal Reserve Chairman Powell described the overall labor market as 'good' and pointed out that the 'downside risks' that appeared with the surge in unemployment in the summer of 2024 'seem to have diminished.'

Powell stated that the labor market is now looser than before the pandemic, and so far, it is clearly continuing to cool in a gradual and orderly manner. 'We believe that no further cooling of the labor market is needed to bring inflation down to 2%.'

Economists expect incoming data to show a more gradual cooling. The employment report for December is expected to show that the USA labor market added 0.153 million jobs this month, down from 0.227 million in November. Meanwhile, the unemployment rate is expected to remain steady at 4.2%.

Morgan Stanley's U.S. economist Sam Coffin wrote in a note to clients: 'The labor market is firm, but job growth is slowing, and the overall labor market conditions are cooling in 2024.' 'The good news is that the labor market hasn't softened suddenly like it did last summer.'

According to the CME FedWatch Tool, as of last Friday afternoon, the market is pricing in only an 11% chance of the Federal Reserve cutting interest rates at its meeting in January.

An important week in the Technology sector.

The CES technology conference kicks off on Monday, with NVIDIA CEO Jensen Huang set to deliver a keynote address. A Q&A session with Analysts is also scheduled for Tuesday.

Since reporting earnings on November 20, NVIDIA's stock has fallen by more than 1% due to concerns about delays in shipping its new Blackwell chip. NVIDIA stocks are still up more than 150% at the end of 2024.

Vivek Arya from Bank of America stated last Thursday that broader market forces and company-specific issues drove the sell-off of Nvidia stocks at the end of last year. Arya mentioned that we are seeing a rotation of MMF from Semiconductors to Software in the market, noting that the latter is less affected by the USA's trade restrictions on imports and exports of goods to China.

He added that for NVIDIA, "the past two quarters have not been calm, really, because they are experiencing growing pains from the old generation product (Hopper) to the new generation product."

(Image source: finance.yahoo)

There is no Santa Claus in the market this year.

The S&P 500 Index has gone through the historically best seven-day period this year without any gains. Since 1950, the S&P 500 Index has risen by 1.3% during the seven trading days starting on December 24 during the so-called Santa Claus rally.

However, this year, the Index has fallen by about 0.5%. LPL Financial chief technical strategist Adam Turnquist wrote in a note to clients that when the S&P 500 Index shows negative returns during this period, it typically indicates that Stocks will weaken for the rest of the year.

However, there was also no Santa Claus rally last year, and the S&P 500 Index still rose by about 24% in 2025.

Callie Cox, chief market strategist at Ritholtz Wealth Management, told Yahoo Finance, "I don't know how far the market could fall from here. I certainly wouldn't put too much emphasis on seasonal patterns. Just because the market is down during the Santa Claus rally doesn't mean we are destined for a drop."

This week's employment report may serve as a key catalyst. Due to the recent rise in the 10-year Treasury yield to nearly 4.6%, which has fueled deteriorating sentiment towards stocks, Piper Sandler's chief market strategist Michael Kantrowitz believes that relief may be on the way.

Kantrowitz stated in a note to clients last Friday, "We think we need to see softer employment in order to start reducing interest rates."

Whether the soft data appears next week or later in the first quarter, Kantrowitz believes that this narrative shift from a rising interest rate environment will help "get stocks back up again."

This week's Calendar

Monday

Economic data: S&P Global US Manufacturing PMI, end of December (expected 58.3, previous value 58.5); S&P Global US Composite PMI, end of December (previous value 56.6); Factory Orders, November (expected -0.3%, previous value +0.2%); Durable Goods Orders, end of November (expected -0.3%, previous value -1.1%)

Earnings: No noteworthy earnings releases.

Tuesday

Economic data: November job openings (expected 7.7 million, previous value 7.74 million); ISM service index, December (expected 53.1, previous value 52.1).

Earnings: Cal-Maine Foods (CALM).

Wednesday

Economic data: MBA mortgage applications for the week ending January 3; ADP private payrolls, December (expected +130,000, previous value +146,000); Federal Reserve December meeting minutes.

Earnings: Albertsons (ACI), Helen of Troy (HELE), Jefferies (JEF).

Thursday

Economic data: Employment numbers (previous value +26.8%); Initial unemployment claims for the week ending January 4 (previous value 0.211 million).

Earnings: KB Home (KBH).

Friday

Economic Calendar: Nonfarm payrolls, December (expected +153,000, previous +227,000); Unemployment rate, December (expected 4.2%, previous 4.3%); December average hourly earnings (expected +0.3%, previous +0.4%); December average hourly earnings year-on-year (expected +4%, previous +4%); December average weekly hours worked (expected 34.3 hours, previous 34.3 hours); December labor force participation rate (previous 62.5%).

Earnings: Constellation Brands (STZ), Delta (DAL), Tilray (TLRY), Walgreens Boots Alliance (WBA).