EZBites for the week ending January 31, 2025
EZBites for the week ending January 31, 2025
DOW:+0.3% (YTD +4.7%)
NASDAQ:-1.6% (YTD+1.6%)
S&P:-1.0% (YTD+2.7%)
The Dow Jones Industrial Average was the only major average to rise this week, eking out a 0.3% gain. The S&P 500 (-1.0%), the NASDAQ Composite (-1.6%), and the Russell 2000 (-0.9%) all ended the week down.
The week started on a sharply lower note for many Tech sector names following weekend headlines about Chinese startup AI platform DeepSeek, which garnered popularity for being way less resource-intensive than AI mainstays such as ChatGPT. This called into question the competitiveness of the large firms currently powering the AI sector, and could alter capital spending plans if the DeepSeek model proves to be as good as advertised. NVIDIA (NVDA) got affected the most, dropping 17% on Monday alone - its largest single-day loss in market capitalization ever. On the week, NVDA shares ended down 15.8% from the prior Friday.
Aside from the AI bombshell, it remained a busy week that featured earnings news from about 2/5 of the S&P 500 (mkt cap), a keyu decision by the FOMC, and multiple influential economic releases.
Apple (AAPL), which closed 5.9% higher this week, Microsoft (MSFT), which declined 6.5% this week, Meta Platforms (META), which jumped 6.4%, and Tesla (TSLA), which declined 0.5% this week, were some of the top names that reported quarterly results. IBM (IBM +13.8%), Starbucks (SBUX +9.0%), Boeing (BA +0.3%), General Motors (GM -8.3%), and Lockheed Martin (LMT -6.8%) were also among the headliners in terms of earnings news.
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On Wednesday, the Federal Open Market Committee (FOMC) voted unanimously to leave the target range for the fed funds rate unchanged at 4.25-4.50%. That was in-line with expectations by the fed funds futures market. It was noted in the directive that "Inflation remains somewhat elevated," which echoed the previous December meeting. What was missing this time was the added statement December's directive that, "Inflation has made progress toward the Committee's 2 percent objective..."
Also noted in the January directive was that, "...labor market conditions remain solid." This messaging pointed to the Fed's wait and see outlook and be more passive than active for now. Fed Chair Powell communicated that stance more than once during his press conference, noting right off the bat that, "With our policy stance significantly less restrictive than it had been, and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance."
There was some volatility in stocks and bonds in immediate response, but markets ultimately settled the FOMC announcement day unchanged from levels prior to the 2:00 ET policy announcement. This indicated that participants were not surprised with Wednesday's decision or the Fed Chair's comments.
This week's economic lineup featured an encouragingly low level of initial jobless claims (207,000) and a refreshingly strong 4.2% growth rate for Q4 personal spending, which was the best since Q1 2023. Also, the core-PCE Price Index (the Fed's preferred inflation gauge) was up 2.8% year-over-year for the third month in a row following a 0.2% month-over-month increase.
Government policy reared its ugly head on Friday, with the White House's confirmation that 25% tariffs for Canada and Mexico, and a 10% tariff for China, will begin on Tuesday, causing a late week selloff. The basis for the tariff actions were tied to immigration, trade deficit, and fentanyl issues.
Treasuries had a volatile week, ultimately settling with price gains. The 10-yr yield was six basis points lower than the previous Friday at 4.57% and the 2-yr yield was three basis points lower than the previous Friday at 4.24%.
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