The major indexes are poised to finish flat this week, as the earnings season is underway with banks reporting their fourth-quarter results. Big bank stocks and credit card companies performed poorly on Tuesday, partially due to President Trump’s proposal to cap credit card interest rates. While the indexes recovered, the same cannot be said for the banks. The market took in a fresh batch of positive economic data, with inflation and unemployment coming in better than expected. With the unemployment rate falling and inflation remaining above the Federal Reserve’s (Fed) target, economists and analysts are forecasting a low probability of a rate cut when the Fed meets later this month.
In corporate news, most of the big banks are set to finish in the red this week after reporting earnings. Two of the stronger reports came from Bank of America and JPMorgan, both of which beat revenue and earnings estimates. Many of the larger banks also made headlines this week due to President Trump’s proposal for a 10%, one-year cap on credit card interest rates. Many bankers pushed back on this idea, citing that it would be disastrous for lower-income consumers, the overall economy, and, of course, the banks’ profits. For lower-income borrowers, the cap could force some individuals to turn to predatory lending, since banks would be unlikely to offer credit to higher risk consumers if they are unable to charge higher interest rates to make up for the cost of loan defaults.
In economic news, December’s Consumer Price Index (CPI) rose 2.7% annually, slightly below expectations. Core CPI (excludes food and energy) rose 2.6%, also slightly below estimates. This final figure brings the average 2025 CPI to 2.7%, an improvement from the 2024 average of 2.9%. Among the items that decreased the most this year were eggs (-20.9%), dairy (-9.9%), gasoline (-3.4%), and airline fares (-3.4%). The U.S. budget deficit also showed signs of improvement coming in at $112 billion, $14 billion less than in December 2024. A few reasons for the decrease in the annual budget deficit include higher income and payroll tax collections and lower education spending. Last Friday, it was announced that the U.S. added 50,000 jobs in December, below expectations of 60,000. However, the good news is that the unemployment rate fell to 4.4% in December, lower than the expected 4.5%.
One of the main sports stories as of late is the incredible turnaround of Indiana University’s football program. Most of their success can be attributed to their head coach, Curt Cignetti. Before Cignetti took over in November 2023, Indiana was 3-24 in Big Ten play in the previous three years. In fact, the school had more losses than any other Division I program in its history. Since hiring Cignetti, they have gone 26-2 and are currently 16-0 this season. Their recent feats include wins over No. 2 Ohio State, No. 9 Alabama (35-point win), and No. 5 Oregon (34-point win). You would be hard-pressed to find any college football team to make this drastic a turnaround in this short a time. What makes its season even more impressive is that it had no five-star recruits and fewer than ten 4-star recruits on its roster. One potentially overlooked contributing factor to its success is the growth of its football budget since 2021, from $24 million to $61 million this year. Indiana will look to cap off its incredible season this upcoming Monday when it faces the Miami Hurricanes.