Indices
- Dow 44,544, +120 or +0.27%.
- Nasdaq 19,627, -327 or -1.65%.
- S&P 6,101, -61or -0.10%.
- MSCI EAFE 2379.76, +18.95 or +0.80%.
- USD10Y 4.569%, -5.7bp or -1.23%.
- WTI Crude $72.53/bbl, -$2.07 or -2.78%.
Tariffs Overshadow an Interesting Week
At the time of this writing, Dow futures are trading down over 1% after the administration unilaterally announced 25% tariffs on a wide range of products originating from Canada and Mexico and a 10% levy on certain Chinese products. Mexico and Canada immediately retaliated, imposing their own tariffs and restrictions on American products. China said it would file a lawsuit with the World Trade Organization.
Meanwhile, during the week, Nvidia and the chip sector were crushed earlier this week when a small private Chinese company, DeepSeek, announced a large language model (LLN) comparable to Open AI’s GPT-4o and o1 at a fraction of the cost ($6mn vs $100mn) and requiring a tenth of the computer power, calling into question the need for Nvidia’s expensive chip sets as well as the demand for massive amounts of new supplies of electricity.
The Federal Reserve Open Market Committee met and as expected, did not raise interest rates. In fact, during the subsequent press conference, Fed Chair Powell stated that the committee was in no hurry to cut rates further given the lack of progress against inflation combined with the strength of the labor markets and the favorable condition of the economy. The probability of only one rate cut in 2025 rose to 31% and that of no rate cuts rose to 12%.
Earnings were a mixed bag with disappointments from Tesla (TSLA), Starbucks (SBUX), Microsoft (MSFT), UPS (UPS), Chevron (CVX) and Exxon Mobile (XOM). Apple (AAPL) was among the success stories along with Lam Research (LRCX), IBM (IBM), and Meta (META). Q4 GDP confirmed the Fed’s outlook on the economy, registering a healthy +2.3% annualized growth rate and December’s inflation report, the PCE, while in line with expectations, demonstrated the stubbornness of the fight against rising prices.
The Upcoming Week: Feb 3 – Feb 7
Amazon (AMZN) and Alphabet (GOOG) are the headliners of this week’s corporate earnings calendar. Chipotle Mexican Grill (CMG), Ford Motor (F), and Walt Disney (DIS) are other notables. The economic calendar is full: with labor data from January JOLTS, ADP Private Payrolls and Non-Farm Payrolls, manufacturing and services data, as well as hourly wages and the U.S. unemployment report.
Economic Calendar
- Monday – January U.S. Final S&P Manufacturing PMI and ISM Manufacturing Survey. Earnings: N/A.
- Tuesday – December Job Openings and Labor Turnover Survey (JOLTS). Earnings: Alphabet (GOOG), Advanced Micro Devices (AMD), Chipotle Mexican Grill (CMG).
- Wednesday – January ADP Private Payrolls, January ISM Services. Earnings: Walt Disney (DIS), Uber (UBER), Yum Brands (YUM), Ford Motor (F).
- Thursday – Initial Jobless Claims. Earnings: Amazon (AMZN).
- Friday – January Non-Farm Payrolls, U.S. Unemployment, Hourly Wages. Earnings: N/A.
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