U.S. stocks closed firmly higher Tuesday, with megacap tech stocks leading a rebound from the $1 trillion wipeout, as investors attempted to look past the angst triggered by the emergence of DeepSeek's AI agent and its impact on the spending and cost assumptions tied to investments in the world's hottest technology.
Apple, the world's most-valuable stock, paced gains in all three indices with a 3.65% advance tied int part to the fact that it hasn't committed nearly the same level of capex as its Magnificent 7 rivals to develop and deploy its AI strategy.
The gains, complimented by upside moves for Microsoft, Google and Meta Platforms, helped lift the S&P 500 0.92% higher into the close of trading, with the Nasdaq rising 2.03%. The Dow, meanwhile, notched its second-consecutive session gain with a 136 point advance.
S&P 500 Closing Bell Heatmap (Jan 28, 2025)$SPY +0.92% 🟩$QQQ +2.03% 🟩$DJI +0.31% 🟩$IWM +0.21% 🟩 https://t.co/PXYdve8jiH pic.twitter.com/Y2Qhsd6DwP
— Wall St Engine (@wallstengine) January 28, 2025
Updated at 1:19 PM EST
Nvidia fightback
Nvidia shares are rebounding firmly in afternoon trading, and were last marked 7% higher at $126.74 each, following a bullish note from Morgan Stanley analyst Joseph Moore.
Moore lowered his price target on Nvidia by $14, taking it to $152 per share, but remains bullish on the sector and Nvidia's position as the market leader in high-end AI powering chips and processors, although he does see the potential for a pullback in hyperscaler spending assumptions.
Related: Top analyst overhauls Nvidia stock price target as DeepSeek impact lingers
Updated at 11:32 AM EST
Still growing ...
The Atlanta Fed's GDPNow tool, a real-time tracker of the U.S. economy, pegged fourth quarter growth at 3.2%, a solid improvement from the 3% estimate it published ten days ago and a reading that is likely to influence the Federal Reserve's rate assumptions as it kicks-off its two-day policy meeting in Washington.
Fed officials forecast GDP growth of 2.1% for the current year, with estimates of 2% and 1.9% for the following two years, when it released its latest Summary of Economic Projections last month.
The Fed also lifted its near-term inflation forecasts, projecting PCE inflation would hover around 2.5%, a notable increase from its September estimate of 2.1%.
On January 28, the #GDPNow model nowcast of real GDP growth in Q4 2024 is 3.2%: https://t.co/T7FoDdgYos. #ATLFedResearch
— Atlanta Fed (@AtlantaFed) January 28, 2025
Download our EconomyNow app or go to our website for the latest GDPNow nowcast: https://t.co/NOSwMl7Jms. pic.twitter.com/9n0tOSl7LS
Updated at 10:47 AM EST
On the mend?
Stocks are extending gains into the morning session, with the S&P 500 now 32 points, or 0.53% higher and the Nasdaq up 212 points, or 1.1% with Nvidia, Amazon, Google and Microsoft all trading firmly in the green.
"The extent of this week’s rout on AI stocks will be informative for investors," said Lauren Goodwin, Economist and Chief Market Strategist at New York Life Investments. "High valuations have been justifiable thanks to strong earnings growth and high barriers to entry. Now that a potentially lower-cost, lower-energy-use option is available, the exceptionalism once taken for granted is now being called into question."
"AI stocks took heavy losses, but the drain is likely temporary," she added. "As large language models become more available, the breadth of use cases is expanding. In the medium term, we expect big AI names will be right-sized by new entrants; we doubt it’s only a days-long process.
A Magnificent Turnaround Tuesday pic.twitter.com/1hN5ris6Qu
— Mike Zaccardi, CFA, CMT 🍖 (@MikeZaccardi) January 28, 2025
Updated at 9:39 AM EST
Modest green
The S&P 500 was marked 4 points, or 0.05% lower in the opening minutes of trading, with the Nasdaq slipping 6 points, or 0.0.02%.
The Dow gained 32 points while the mid-cap Russell 2000 nudged 1 point, or 0.05% higher.
The dust is now settling after Monday’s long overdue AI reckoning, and while we still believe in the AI-driven productivity story, investing in this sector going forward may not be as easy as it was over the past two years," said Emily Bowersock Hill, CEO and founding partner, Bowersock Capital Partners. "We expect investors to be more discerning and selective when it comes to AI investing.
S&P 500 Opening Bell Heatmap (Jan 28, 2025)$SPY +0.23% 🟩$QQQ +0.21% 🟩$DJI +0.07% 🟩$IWM +0.28% 🟩 pic.twitter.com/AUGh6FlFrI
— Wall St Engine (@wallstengine) January 28, 2025
Updated at 7:16 AM EST
More Boeing red ink
Boeing (BA) posted its biggest annual loss in five years, slumping more than $11.8 billion in the red following a crippling machinists' strike and ongoing costs tied to its safety and efficiency efforts.
Boeing, which pre-released its fourth-quarter earnings last week, said its turnaround would be a "multiyear journey" that will include a deep overhaul of the planemaker's culture following a series of fatal crashes and near misses over the past five years.
"We made progress on key areas to stabilize our operations during the quarter and continued to strengthen important aspects of our safety and quality plan," said Chief Executive Kelly Ortberg, who took the helm in August.
"My team and I are focused on making the fundamental changes needed to fully recover our company's performance and restore trust with our customers, employees, suppliers, investors, regulators and all others who are counting on us."
Boeing shares were marked 0.8% lower in premarket trading to indicate an opening-bell price of $173.80, a move that would extend their one-year decline to around 16%.
$BA Earnings:
— AlphaSense (@AlphaSenseInc) January 28, 2025
- Revenue of $15.2 billion, GAAP loss per share of ($5.46) and core (non-GAAP) loss per share of ($5.90)
- Operating cash flow of ($3.5) billion; cash and marketable securities of $26.3 billion
"We made progress on key areas to stabilize our operations during the… pic.twitter.com/jWkcKcCWnc
Updated at 7:08 AM EST
GM revs 2025 profit growth
General Motors GM shares nudged higher after the carmaker posted better-than-expected fourth-quarter earnings and a solid profit forecast for the coming year.
GM sees net income of between $11 and $12 per share for 2025, topping Wall Street's $10.85 consensus, after selling 2.7 vehicles last year and earning $10.60 per share.
"Of course, there is uncertainty over trade, tax, and environmental regulations and we have been proactive with Congress and the administration," said CEO Mary Barra. "In our conversations, we have stressed the importance of a strong manufacturing sector and American leadership in advanced technologies. It’s clear that we share a lot of common ground, and we appreciate the dialog."
GM shares were marked 1.02% higher in premarket trading to indicate an opening bell-price of $55.44 each.
Stock Market Today
Stocks ended firmly lower last night, led by a 3.07% decline for the Nasdaq and a 17% plunge in Nvidia (NVDA) shares. The market moves lopped $593 billion from its market value, the biggest single-day loss on record, following the emergence of China-based DeepSeek's AI agent.
The new AI model claims to have cost less than $6 million and commands performance benchmarks equal to or better than those of rivals such as OpenAI's ChatGPT and Meta Platforms' (META) Llama 3, each of which cost around $500 million.
President Donald Trump described the emergence of DeepSeek as a "wake up call' for the tech industry, which is forecast to spend more than $2 trillion over the next three years on AI developments.
Nvidia shares are looking to claw back some of yesterday's losses in early trading. But investors are likely to focus first on commentary from Meta, Microsoft (MSFT) and Apple (AAPL) on AI developments this week, as each posts December-quarter earnings, starting on Wednesday.
TheStreet
Stocks in the meantime are set for a modest bounce higher, with the Nasdaq called 161 points into the green with futures tied to the S&P 500 suggesting a 27 point advance at the opening bell.
Gains are likely to be tempered, however, by the sharp move higher in the U.S. dollar, which rose 0.48% against a basket of its global peers in overnight trading. The stronger buck followed comments from President Trump that he would like to see "far higher" tariffs that the 2.5% universal levy proposed by newly confirmed Treasury Secretary Scott Bessent.
Related: DeepSeek rattles tech stocks ahead of Microsoft, Meta earnings
"These comments contradict the markets’ tentatively sanguine assumption that tariffs would be more of a case-by-case measure (like for Colombia) and not universal," said ING strategist Francesco Pesole.
"Probably, the fact that these plans are being actively laid out by the Treasury and not simply hinted at by Trump means the additional risk premium gap now embedded into dollar crosses may prove harder to close," he added.
Treasury bond yields were also inching higher ahead of the start of the Federal Reserve's two-day meeting in Washington, although rate traders are pricing in little chance of a policy change from Chairman Jerome Powell and his colleagues until at least June.
Benchmark 10-year Treasury note yields were last marked 4 basis points higher from Monday's close at 4.567% while 2-year notes rose to 4.224% following a mixed auction of $69 billion in new paper on Monday.
More Wall Street Analysis:
- Every major Wall Street analyst's S&P 500 forecast for 2025
- Iconic fund manager has blunt words on markets after Trump return
- Fidelity analyst unveils market forecast for 2025
In overseas markets, Europe's Stoxx 600 was marked 0.72% higher in Frankfurt, with Britain's FTSE 100 rising 0.55% in London.
Overnight in Asia, tech losses held down benchmarks across the region, with Japan's Nikkei 225 falling 1.39% in Tokyo and the MSCI ex-Japan index sliding 0.24% into the close of trading.
Related: Veteran fund manager issues dire S&P 500 warning for 2025
