Down week, up month

02/03/25
  • Market stumbles on DeepSeek, tariffs
  • Megacaps (mostly) rally, gold hits record, oil slump continues
  • This week: jobs report, more megacap earnings, tariff watch

Many traders likely thought last week would mostly be a story of earnings and interest rates, given the Fed’s policy meeting and the fact that multiple megacap companies were scheduled to report their numbers. But as is often the case, it was the news that no one saw coming that arguably had the biggest impact on the market.

First, last Monday’s news of China’s DeepSeek AI app was followed by a US tech sector sell-off and the S&P 500’s (SPX) biggest down day of the year. While the SPX erased all of that loss by midday Friday—riding encouraging earnings and solid economic data—it turned lower for the day (and week) after news that the White House planned to slap tariffs on Canada, Mexico, and China over the weekend:

Chart 1: S&P 500 (SPX), 12/20/24–1/31/25. S&P 500 (SPX) price chart.

Source: Power E*TRADE. (For illustrative purposes. Not a recommendation. Note: It is not possible to invest in an index.)


The headline: AI and tariffs reintroduce markets to volatility.

The fine print: In between the Monday and Friday surprises, earnings and economics held sway. Megacaps Meta (META), Tesla (TSLA), and Apple (AAPL) all rallied after releasing earnings. The exception was Microsoft (MSFT), which fell 6.2% last Thursday on disappointing outlooks for its cloud business and AI spending.1 And although Q4 GDP came in below expectations, the drop-off was mostly the result of a jump in the trade deficit—the report also showed consumer spending was strong. Alongside another low weekly jobless claims number, the data highlighted continued US economic strength.

The numbers: 2.8%, the year-over-year change in the core PCE Price Index, the Fed’s preferred inflation gauge. That was unchanged from the previous month, highlighting ongoing inflation stickiness.

The scorecard: The Dow Jones Industrial Average (DJIA) led the market for a second week:

US index returns for week ending January 31, 2025.

Source (data): Power E*TRADE. (For illustrative purposes. Not a recommendation.)


Sector returns: The strongest S&P 500 sectors last week were communication services (+2.7%), consumer staples (+1.9%), and health care (+1.7%). The weakest sectors were tech (-4.6%), energy (-3.8%), and utilities (-2.1%).

Stock movers: Akero Therapeutics (AKRO) +98% to $51.52 on Monday, Tectonic Therapeutic (TECX) +113% to $54.84 on Thursday (and -41% to $24.44  on Tuesday). Nebius Group (NBIS) -37% to $26.08 on Monday, Cargo Therapeutics (CRGX) -74% to $3.39 on Thursday.

Yields: The benchmark 10-year Treasury yield fell 0.07% to 4.55% last week.

Futures: March WTI crude oil (CLH5) fell $2.13 to $72.53 last week. Gold hit all-time highs, with April gold (GCJ5) ending the week up $28.40 at $2,835. Biggest gainers: March coffee (KCH5) +8.7%, April platinum (PLJ5) +7.4%. Biggest decliners: March natural gas (NGH5) -11.8%, March rough rice (ZRH5) -5.7%.

Coming this week

Jobs data dominates a very busy start to a new month:

Monday: S&P Global Manufacturing PMI, ISM Manufacturing Index, construction spending
Tuesday: Job Openings and Labor Turnover Survey (JOLTS), factory orders
Wednesday: ADP private employment, US trade deficit, S&P Global Services PMI, ISM Services Index
Thursday: job cuts, productivity and labor costs
Friday: Employment Report, consumer sentiment (preliminary)

Megacaps Amazon (AMZN) and Alphabet (GOOGL) are the most prominent tickers on an earnings calendar with no shortage of high-profile names. Some highlights:

Monday: Tyson Foods (TSN), Clorox (CLX), Fabrinet (FN), NXP Semiconductors (NXPI), Palantir (PLTR), Rambus (RMBS), Vertex Pharmaceuticals (VRTX)
Tuesday: Archer Daniels Midland (ADM), Estee Lauder (EL), Merck (MRK), PepsiCo (PEP), Pfizer (PFE), PayPal (PYPL), Regeneron Pharmaceuticals (REGN), Spotify (SPOT), Advanced Micro Devices (AMD), Chipotle (CMG), Electronic Arts (EA), Enphase Energy (ENPH), Alphabet (GOOGL), Match Group (MTCH)
Wednesday: Disney (DIS), Fiserv (FI), Novo-Nordisk (NVO), Toyota (TM), Uber (UBER), Arm (ARM), Ford (F), MicroStrategy (MSTR), O’Reilly Automotive (ORLY), Impinj (PI), Qualcomm (QCOM), Quantum (QMCO), Silicon Motion (SIMO), Viking Therapeutics (VKTX)
Thursday: AstraZeneca (AZN), Bristol-Myers Squibb (BMY), ConocoPhillips (COP), Honeywell (HON), Hershey (HSY), Eli Lilly (LLY), Roblox (RBLX), Ralph Lauren (RL), Spectrum Brands (SPB), Tapestry (TPR), Amazon (AMZN), Microchip (MCHP), Cloudflare (NET), Verisign (VRSN)
Friday: Avantor (AVTR), Cboe Global Markets (CBOE), Ubiquiti (UI)

Check the Active Trader Commentary each morning for an updated list of earnings announcements, IPOs, economic reports, and other market events.

Deeper dives into DeepSeek

The stock market’s rebound from last Monday’s DeepSeek sell-off may have led some market observers to conclude it was nothing more than a blip, but it’s more likely we saw the first chapter of a story that still has a long way to go.

While Morgan Stanley & Co. strategists acknowledge the initial market reaction was overdone, they also think DeepSeek will ultimately be a viable competitor in the AI space. That said, they’re still bullish on US-based AI semiconductors. 2

The news also hit a wide range of energy stocks, since one of the implications of DeepSeek’s supposed breakthroughs was that it was less energy intensive. Morgan Stanley & Co analysts thought those concerns were also overblown, arguing that US AI infrastructure will continue to grow rapidly.3

 

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1 Reuters. Microsoft shares slide as cloud forecast, AI spending disappoint. 1/29/25
2 MorganStanley.com. Latest thoughts on DeepSeek and other concerns; why we remain positive on AI semis. 1/28/25.
3 MorganStanley.com. DeepSeek: US Power Infrastructure Implications. 1/29/25.

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