The S&P 500 (Index: SPX) had a pretty active week despite the trading week being shortened by the Presidents Day holiday. The index reached an all-time new record high of 6,144.15 on Wednesday, 23 February 2025 before retreating to close out the week at 6,013.13, about 1.7% below where it ended the week before.

Driving the market to its new record high was a continuation of the momentum in investor expectations toward more rather than fewer Federal Reserve rate cuts in 2025.

That shift could be seen in the CME Group's FedWatch Tool, which is once again forecasting two rate cuts in 2025. It projects a quarter point rate cut when Fed meets on 18 June (2025-Q2), six weeks later than it predicted a week ago. Meanwhile, the FedWatch tool is also forecasting another quarter point rate cut when the Fed meets on 10 December (2025-Q4).

But late in the week, something prompted investors to suddenly shift their forward-looking attention inward to the nearer term future of 2025-Q2. The latest update of the alternative futures chart shows that sudden shift, with the trajectory of the index moving to the bottom of the typical range for where we would expect to find it when investors focus their attention on 2025-Q2.

Since the change was less than two percent, we don't have high confidence in a prominent explanation for the sudden drop, which traces back to a report pointing to the possible emergence of a new infectious coronavirus in China. There are competing explanations for the sudden pullback in the S&P 500, which you can evaluate for yourself in the market-moving headlines of the week that was:

Tuesday, 18 February 2025

• Signs and portents for the U.S. economy:
  • Oil prices extend gains after Ukraine drone strike hits Kazakh supply
    • OPEC+ is not considering delay to April oil supply hike, Novak says
  • Trump says he will introduce 25% tariffs on autos, drugs and chips
    • FACTBOX All of Donald Trump's tariffs and threatened trade actions
• Fed minions starting to realize they didn't fix Bidenflation, claim they won't become deer in the headlights because of uncertainty, but still plan to keep U.S. interest rates unchanged:
  • Fed policy should stay restrictive until there's more inflation progress: Daly
  • Fed's Waller: Uncertainty over trade, other policies, shouldn't paralyze rate moves
    • Fed's Bowman: Greater confidence in falling inflation needed before more cuts
  • Fed's Harker supports steady interest rate policy stance for now
• Bigger stimulus developing in China:
  • The significance of China Xi's meet with private enterprises
    • China's tech rally rests on 'hot money'
• BOJ minions expected to hike Japan's interest rates after claiming they will:
  • Japan braces for BOJ to lift rates sooner and higher
  • Japan's GDP beats forecasts as consumption, business spending perk up
• Other central banks cutting interest rates, becoming world's biggest gold bugs:
  • Australia's central bank cuts rates, cautious on further easing
  • Goldman Sachs raises gold forecast citing strong central bank demand
• ECB minions excited to keep working from home where nobody can see how much they really do:
  • ECB extends work from home policy even as others reverse course
• S&P 500 ends at record high as 'overvalued' stock market dashes up in last minutes of trade
  • S&P 500 ekes out all-time closing high as Fed minutes eyed
  • Trump sending fewer market moving social media posts than previous term, study shows

Wednesday, 19 February 2025

• Signs and portents for the U.S. economy:
  • Oil holds near one-week high on supply concerns, sanctions on Russia eyed
    • S crude stockpiles likely rose last week, products seen down
  • GM CFO says if US tariffs are permanent, company must consider plant locations
• Fed minions want to see more progress on their fixing Bidenflation before cutting US interest rates again:
  • Fed officials seek ‘further progress’ on inflation before cutting rates
    • Fed officials weighed slowing or pausing bond drawdown last month
    • Potential impact of Trump policies stirring inflation concerns at Fed, minutes show
• Bigger trouble, stimulus developing in China:
  • China's new home prices stagnate in January as demand struggles
  • In balancing risks and rewards, China set to leave lending rates unchanged in Feb
• Another central bank acts to cut interest rates:
  • New Zealand central bank cuts rates by 50bps
• ECB minions arguing policy amongst themselves
  • Top ECB policymakers outline opposing policy arguments
  • ECB's Panetta says Europe should consider simpler banking rules
• Wall Street notches another record close after Fed minutes, tariff action
  • S&P 500 edges to record closing high as Fed minutes parsed

Thursday, 20 February 2025

• Signs and portents for the U.S. economy:
  • Oil rises for third day on US fuel stocks draw, worries about Russia disruptions
  • US new vehicle sales set to rise 8.1% in February, report says
  • US labor market stable; hit from federal government belt tightening awaited
• Fed minions want to see more progress on their fixing Bidenflation before cutting US interest rates again:
  • Fed's Musalem flags risk of rising inflation expectations and stagflation
  • Fed's Goolsbee says PCE inflation reading unlikely to be as 'sobering' as CPI
  • Fed's Jefferson says Fed can take time on next interest rate decision
  • Fed's Barr, stepping down from regulatory post, warns against weaker bank rules
• Bigger steel prices developing in China:
  • Iron ore gains on strong China steel consumption, short covering
• BOJ minions expected to hike interest rates again as Japan's inflation risk rises:
  • BOJ to raise rates once more this year to 0.75%, most likely in Q3
  • BOJ may raise rates twice more this year, underpin yen, says ex-FX diplomat Watanabe
• ECB minions running a money-losing business:
  • ECB reports another record annual loss, says it may suffer more losses
• Stocks finish lower, with Dow down 1% as Walmart guidance falls short
  • Wall St slides as weak Walmart guidance prompts worries about consumer demand
    • Higher egg prices drove up inflation, and Walmart grocery revenue
  • Gold prices soar to record high fueled by safe-haven demand

Friday, 21 February 2025

• Signs and portents for the U.S. economy:
  • US existing home sales fall more than expected in January
    • US Existing-Home Sales Drop Back Again With Mortgage Rates at 7%
  • Oil falls 2% but still set for slight weekly gain on supply jitters
  • DOJ launches UnitedHealth billing probe, WSJ reports; insurer says it is unaware
• Fed minions blame AI for faster investor reactions to Fed minion statements, continue to worry about untamed Bidenflation:
  • Fed's Jefferson says AI is speeding investors' reactions to central bankers' messages
  • Fed's Kugler says inflation risks remain, cites economic policy uncertainty
• Bigger trouble, failing stimulus developing in China:
  • Another pandemic scare as scientists discover new coronavirus in China
  • China's key property rescue tools are too hard to use to make an impact
• BOJ minions thinking about starting spring with a rate hike as Japan's inflation rears up:
  • BOJ could raise interest rates in March, says ex-policymaker Shirai
  • Japan’s core inflation hits 19-month high
    • BOJ isn't fretting much about rising bond yields - for now
  • Japan's factory activity shrinks for 8th straight month, PMI shows
• Nasdaq ends 2% lower as gloomy economic data fuel U.S. stocks to weekly losses
  • China Reports New Coronavirus 'With Pandemic Potential' Discovered
  • UnitedHealth sends Medicare insurers lower after report on DoJ probe

The Atlanta Fed's GDPNow tool's projection of what real GDP growth will be in the 2025-Q1 held steady at +2.3% for a second week.

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