On Wall Street, It's the 1980s All Over Again
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What is the main topic discussed in this episode?
With your money briefing, I'm J.R. Whalen at The Wall Street Journal in New York. It was a January to remember on Wall Street with several of the biggest U.S. indexes turning in their best performances since the 1980s. But is that upward trend likely to continue? We'll check in with the journal's markets team in a moment. First, these money and market stories you should know. If you bought a new home in November, you weren't alone.
What drove the Dow and S&P to their best January gains since the 1980s?
New home sales rose 16.9% from a month earlier to a seasonally adjusted annual rate of 657,000. Despite that increase, sales of new homes were down 7.7% compared to a year ago, and that could mean a bumpy housing market going forward. and higher mortgage rates and a run-up in prices have slowed home purchases over the past year. And the big cities along the coast might not be the best place to start your search for a new job. The job search site Zipia ranks states based on factors such as changes in yearly unemployment as well as how far your income goes, and says the number one state is Iowa. with Minnesota, Virginia, Nebraska, and Oklahoma rounding out the top five. The bottom five states, according to Zipia, are Mississippi, Alabama, Kentucky, Arizona, and at number 50, Louisiana.
It's been a January to remember on Wall Street, the Dow Jones Industrial Average rose 7.2%, the best monthly gain since 1989, while the S&P 500 turned in a 7.9% gain, its best monthly jump since 1987. So what's behind the big jump in the markets and are there obstacles down the road? Wall Street Journal markets reporter Amrit Ramkumar is here with some answers. So Amrit, Wall Street was in the doldrums for much of the fourth quarter and it seems like what was needed was a good dose of positive news about the economy. And I got a lot of it.
I think that's exactly right. A lot of it driven definitely by the Federal Reserve, which has basically done almost a 180, it seems like, in the six weeks between its December meeting and the end of January. And we saw early in January the comments from Chairman Powell really kind of ignited the rally. And helped sentiment, which was the biggest thing.
How did Federal Reserve comments and policy shifts spark the January rally?
People kind of realized that the Fed isn't going to aggressively tighten, at least in the short term, and cause some really big problems for the economy that is set to slow this year. So that's had a huge impact. And then that, along with some economic data that was better than expected, I think, like you're saying, really helped. And also, you have to remember, earnings calls have generally, I think, helped calm some investor fears. Companies like Boeing saying that demand generally is strong has definitely had a positive effect too.
In terms of the Federal Reserve, it really did help bank stocks. And in terms of Chairman Powell's comments just this week in how he is in favor of a wait-and-see attitude in terms of interest rates until the Fed sees something to change its mind, that's going to benefit bank stocks, I would imagine, for the short-term foreseeable future.
It depends.
I think definitely short- I mean, there are no guarantees. Yeah, yeah. But in terms of there being a foundation of good news, I would imagine the banks are fairly happy.
Oh, absolutely. Especially because, yeah, like small caps and banks were among the hardest hit along with industrials toward the end of the last quarter when people were really having these kind of intense recessionary worries. And now they are rallying the most this month. And so at least in the short term, for sure, the yield curve has steepened, which is good for banks. And a lot of them, again, had pretty strong earnings that weren't quite as bad as expected, which is what pretty strong means now in this context when stocks had fallen so much. So I think, yes, in the short term, but people do say like moving forward, if you look out, one of the reasons the Fed might be pausing is because the economy isn't doing as well.
So it is possible as people will get these things and depending on what happens with trade and all these other factors that if sentiment changes, those could go back to being like the hardest hit again.
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Chapters
5 chapters
1
What is the main topic discussed in this episode?
0:05–0:27
2
What drove the Dow and S&P to their best January gains since the 1980s?
0:27–2:21
3
How did Federal Reserve comments and policy shifts spark the January rally?
2:21–5:16
4
Why did bank and small‑cap stocks benefit most from the early‑year move?
5:16–8:24
5
What role did economic surprises and the Citigroup Economic Surprise Index play?
8:24–8:39
Speakers
2 identifiedMore from WSJ Your Money Briefing
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