The recent trajectory of artificial intelligence technology, coupled with the U.SFederal Reserve's shift back towards lower interest rates, has led to a double-digit increase in all three major American stock indices last yearHowever, disappointment loomed large in the markets during the final trading week of the year due to a sell-off, resulting in the absence of the traditional "Santa Claus rally" for the second consecutive year.

As the new year progresses, traders and analysts are keenly awaiting a series of critical economic indicators, including last year's non-farm payroll dataSimultaneously, the Consumer Electronics Show (CES) will kick off, prompting speculation about whether new product releases and technological advancements from leading tech giants can rejuvenate the stock market.

Crucial economic data is expected to put the Federal Reserve's resolve under scrutiny

Early in the year, the economic data has been relatively subdued, with the job market remaining stableThe U.SDepartment of Labor reported a decline of 9,000 in the number of individuals filing for unemployment benefits, bringing the total to 211,000 – the lowest level in nearly eight months after Christmas.

Since last quarter, requests for unemployment benefits in the U.Shave lingered at low levelsBusinesses, confident in the stability of economic growth, are inclined to retain their workforceYet, the demand for new hires has shown signs of slowing down, leading to extended periods of job searching for the unemployedWall Street analysts predict that this trend will extend into early 2025 as companies come to terms with how U.Spolicies will influence the economy.

According to Schwartz, a senior economist at Oxford Economics, the labor market, while cooler compared to last year, remains characterized by a slowdown in job growth rather than mass layoffs, which is likely to alleviate the upward pressure on unemployment rates

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The upcoming non-farm payroll report is poised to be pivotal, with data potentially reinforcing the Fed's conviction that a cautious pace of interest rate normalization remains appropriate.

An unexpected uptick in the Dallas Fed Manufacturing Index indicated a return to expansion, alongside an increase in the December ISM manufacturing index to 49.3 percent, a nine-month high, spurred on by surging new orders.

Simons, an economist at Jefferies, shared a predominantly optimistic outlook for U.Smanufacturing, stating that positive indicators far outnumber negative onesHe noted that while interest rate cuts may slow down, they are not expected to ceaseThe new administration is focusing on actions it deems beneficial for enhancing competitiveness in U.Smanufacturing, including deregulation, a more lenient tax environment, and protectionist tariffsWhile the net benefits of tariffs remain uncertain, other positive forces are becoming clearer.

In the medium to long term, U.S

Treasury bonds have been exhibiting slight fluctuations, with the benchmark 10-year Treasury yield holding steady near a one-year high of 4.60 percentThe FedWatch tool from the CME Group shows that traders now anticipate approximately 42 basis points of interest rate cuts from the Federal Reserve this year.

Schwartz also noted the rising long-term Treasury yields have sparked widespread concern"This will impact mortgage rates in the housing market and could affect consumer confidence," he commentedStrong growth in consumer spending was a primary driver behind last year's GDP expansion, and yet recent surveys indicate that households are increasingly apprehensive about falling interest rates and labor market prospectsObserving the implementation of new policies under the upcoming administration alongside the Fed's monetary reactions will be critical in the coming monthsIn contrast to market consensus, he believes the Fed is likely to cut rates three times this year.

Despite the promising economic indicators, U.S

stocks have had a rocky start to the new year, with the traditional "Santa Claus rally" failing to materializeThe major stock indices each fell by more than 0.5% during the short trading week.

The market sectors displayed a divergent performanceAccording to the Dow Jones statistics, energy stocks surged by 3.2% amidst a rebound in international oil prices, while the materials sector dipped by 2.1%. Non-essential consumer goods and essential consumer goods segments both dropped by over 1%. Prominent stocks like Tesla saw a drop of 4.9% over the week, with the electric vehicle manufacturer slated to deliver fewer cars in 2024 compared to the preceding year, despite achieving record sales in the Chinese marketNonetheless, investment bank Evercore ISI has raised its target price for Tesla stock from $195 to $275.

Analysts contend that market movements reflect investor concerns regarding potential policy uncertainties

Anderson, founder of Andersen Capital Management, remarked, "It's a complicated pictureInitially, investors viewed the developments in November last year as favorable as they signaled a friendly market outcomeHowever, the primary concern has shifted to whether such decisions may lead to inflation, and if so, whether it would prompt the Fed to abruptly change course and start raising rates."

Investment flows indicate a marked decrease in investor enthusiasmData from the London Stock Exchange shows that U.Sstock funds recorded a net inflow of $490 million in the past week, a stark decline from the $20.5 billion in buying activity observed the previous weekConversely, money market funds continued to garner interest for a second week, with net purchases reaching $72.99 billion – the highest in nearly four weeks.

Hailed as the 'Spring Festival Gala of Technology', the 2025 Consumer Electronics Show is set to begin, with semiconductor titans like Nvidia, Intel, and AMD expected to unveil a slew of new products

Interestingly, Nvidia's share price is just 6% shy of its historical highGoldman Sachs, in its market outlook report, indicated that the breadth of AI investments is likely to expand as more applications emerge, advising investors to focus on companies generating revenue from AI-related products.

Charles Schwab noted in its market forecast that investors are still navigating the implications of the last December's relatively hawkish FOMC meeting, alongside the upward bias in long-term yieldsAlthough economic data continues to appear healthy, there is a growing anxiety regarding a potential resurgence of inflation, leading to doubts about the Fed's degree of easing in 2025. While the market seems to have lost some of the optimism seen since November of last year, the recent recalibration may be viewed as a healthy period of consolidation, helping to mitigate some of the recent speculative excess and establish a more sustainable foundation for the new year.

Looking ahead, the institution believes that a technical rebound appears to be occurring