Weekly Market Update for January 31, 2025
by Jared Plotz, Director of Research
Major indices were choppy this week – beginning the week down due to a concern out of China before clawing the bulk of their way back. Then, late on Friday, concerns around tariffs turned stocks lower again. The S&P 500 declined -1.0% this week, while the Nasdaq fell -1.6%. The 10-Year Treasury yield, an interest rate indicator, closed at 4.55%, down -7 bps from last week. The 6-Month US Treasury, a favorite of our US Treasury strategy, ended up +2 bps at 4.30%.
Economic headlines didn’t provide much direction. The Federal Reserve left benchmark rates unchanged, and Chair Powell’s commentary was consistent with future decisions being data-dependent. The preliminary reading of Q4 real U.S. GDP was just a hair light of forecasts, suggesting the economy grew at a 2.3% annualized rate in Q4, down from 3.1% in Q3. Full-year 2024 looks to have grown by 2.8%, compared to 2.9% in 2023. Then on Friday the White House suggested new tariffs would begin on Saturday.
The biggest headline of the week was an open-source AI model released out of China, which pressured AI-linked equities in the US. The Chinese model boasts good performance, while claiming to consume less power by utilizing less-sophisticated Nvidia chips and a lower-cost training method. This particularly impacted Nvidia, though the stock has recovered off its low of the week. While it is too early to know how this may ultimately affect Nvidia and the broader space, it is possible cheaper models may lead to greater and faster AI adoption by enterprises.
Earnings reports from the big technology companies have kicked off. Meta Platforms (Facebook) posted a strong quarter to end 2024. Investors’ favorable view on the company’s AI investments allowed it to dodge the pullback seen in other AI names. Microsoft showed a deceleration in its cloud computing business, but said its AI revenues are growing strongly. Apple iPhone shipments disappointed given a decline in the greater China region; however, other products and its services business outperformed. Overall, there were no indications that data center spending would slow, but rather executives said they’d stick to large, planned increases over 2024 levels. Lastly, credit card companies exceeded expectations, noting that volumes accelerated in January – a sign that consumer spending remains resilient.
Next week brings quarterly results from Google (Tuesday afternoon) and Amazon (Thursday afternoon), as well as a myriad of other companies. Some manufacturing and construction data will be released on Monday, while the big employment report comes on Friday. Nonfarm payrolls are expected to have risen by 150,000 in January, after jumping by more than 250,000 in December. The wildfires in California and snowstorms in the South may impact the employment number.
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