The S&P 500 Index ($SPX) (SPY) today is down -1.63%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.35%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -2.66%. March E-mini S&P futures (ESH25) are down sharply by -1.63%, and March E-mini Nasdaq futures (NQH25) are down sharply by -2.75%.
Stocks today are sharply lower, with the S&P 500 sinking to a 1-week low and the Nasdaq 100 plunging to a 1-1/2 week low. The plunge in technology stocks today is dragging the overall market lower. Chip stocks and AI-related companies are plummeting today because China’s artificial intelligence startup DeepSeek appears to provide comparable performance to Western chatbots at a fraction of the price. The latest model of DeepSeek, released last week, is widely seen as competitive with those of OpenAI and Meta Platforms and is now at the top of Apple’s App Store rankings. It also questions the sky-high valuations for AI-related stocks and the massive research and developmental spending business model. Jeffries said today that “concerns have immediately emerged that DeepSeek could be a disruptor to the current AI business model, which relies on high-end chips and extensive computing power.”
Stocks were also rattled after President Trump on Sunday threatened to impose tariffs on Colombia over a dispute about deported migrants but later withdrew the threat after reaching a deal with Colombia.
Signs of weakness in China’s economy ares bearish for global growth prospects. The China Jan manufacturing PMI unexpectedly fell -1.0 to 49.1, weaker than expectations of no change at 50.1 and the steepest pace of contraction in 5 months. Also, the Jan non-manufacturing PMI fell -2.0 to 50.2, weaker than expectations of no change at 52.2.
The markets will look at the results of the 2-day FOMC meeting that ends on Wednesday and post-meeting comments from Fed Chair Powell. Expectations are for the FOMC to keep the fed funds target range unchanged at 4.25%-4.50%.
Earnings season is in full swing as companies report Q4 earnings results. Megacap technology stocks begin reporting earnings this week, with Microsoft and Tesla reporting on Wednesday and Apple reporting on Thursday. According to Bloomberg Intelligence, analysts estimate S&P 500 earnings grew by +7.5% y/y in Q4, the second-highest pre-season forecast in the past three years.
The markets are discounting the chances at 1% for a -25 bp rate cut at the January 28-29 FOMC meeting.
Overseas stock markets today are lower. The Euro Stoxx 50 fell to a 1-week low and is down -1.02%. China’s Shanghai Composite Index fell from a 3-week high and closed down -0.06%. Japan’s Nikkei Stock 225 closed down -0.92%.
Interest Rates
March 10-year T-notes (ZNH25) today are up +19 ticks. The 10-year T-note yield is down -8.3 bp to 4.538%. Mar T-notes today rallied to a 5-week high, and the 10-year T-note yield tumbled to a 5-week low of 4.496%. Today’s sharp selloff in stocks has prompted safe-haven buying of T-notes. Also, a decline in inflation expectations is bullish for T-notes after the 10-year breakeven inflation rate fell to a 2-1/2 week low today at 2.385%.
T-notes fell back from their best levels after today’s news showed the Dec Chicago Fed national activity index rose more than expected to a 7-month high. Supply pressures are also bearish for T-notes as the Treasury today will auction $69 billion 2-year T-notes and $70 billion 5-year T-notes as part of this week’s $213 billion auction slate of T-notes and floating rate notes.
European government bond yields today are moving lower. The 10-year German bund yield is down -4.6 bp to 2.523%. The 10-year UK gilt yield fell to a 3-week low of 4.555% and is down -4.4 bp to 4.585%.
The German Jan IFO business climate rose +0.4 to 85.1, stronger than expectations of 84.8.
Swaps are discounting the chances at 97% for a -25 bp rate cut by the ECB at its January 30 policy meeting.
US Stock Movers
Chip stocks are sliding today after Chinese startup DeepSeek raised questions about the high valuations of the stocks. As a result, Marvell Technology (MRVL) is down more than -14%, and Broadcom (AVGO) is down more than -11%. Also, Nvidia (NVDA) is down more than -10% to lead losers in the Dow Jones Industrials, and ASML Holding NV (ASML) and Micron Technology (MU) are down more than -7%. In addition, Lam Research (LRCX), Applied Materials (AMAT), Advanced Micro Devices (AMD), and KLA Corp (KLAC) are down more than -5%.
AI and AI infrastructure stocks are under pressure amid concerns that AI models from Chinese firm DeepSeek could disrupt US technological leadership. As a result, ARM Holdings (ARM), Super Micro Computer (SMCI), and Oracle (ORCL) are down more than -8%, and Palantir Technologies (PLTR) is down more than -6%.
Megacap technology stocks are falling today, with Microsoft (MSFT) and Alphabet (GOOGL) down more than -3%. Also, Amazon.com (AMZN) is down more than -2%, and Meta Platforms (META) is down more than -1%.
Cryptocurrency-exposed stocks are falling today, with the price of Bitcoin down more than -3% to a 1-week low. As a result, Riot Platforms (RIOT) is down more than 10%. Also, Mara Holdings (MARA) and Coinbase Global (COIN) are down more than -5%, and MicroStrategy (MSTR) is down more than -3%.
SoFi Technologies (SOFI) is down more than -9% after forecasting full-year adjusted Ebitda of $845 million-$865 million, well below the consensus of $905.6 million.
GE Vernova (GEV) is down more than -17% after Guggenheim Securities downgraded the stock to neutral from buy.
Akero Therapeutics (AKRO) is up more than +120% after releasing promising results from a mid-stage trial of its experimental treatment for patients with cirrhosis due to metabolic dysfunction-associated steatohepatitis, a liver disease.
AT&T (T) is up more than +5% to lead gainers in the S&P 500 after reporting Q4 adjusted EPS of 54 cents, above the consensus of 50 cents.
Defensive healthcare and consumer staple stocks are climbing today with the selloff in the broader market. Kraft Heinz (KHC), Tyson Foods (TSN), General Mills (GIS), and Conagra Brands (CAG) are up more than +3%. Also, UnitedHealth Group (UNH) is up more than +2% to lead gainers in the Dow Jones Industrials. In addition, Johnson & Johnson (JNJ) and JM Smucker (SJM) are up more than +2%.
Logility Supply Chain Solutions (LGTY) is up more than +25% after Aptean agreed to acquire the company for $14.30 per share.
Crown Castle (CCI) is up more than +3% after JMP Securities initiated coverage of the stock with a recommendation of outperform and a price target of $115.
Portillo’s (PTLO) is up more than +7% after Stifel upgraded the stock to buy from hold with a price target of $16.
American Tower (AMT) is up more than +2% after JMP Securities initiated coverage of the stock with a recommendation of outperform and a price target of $225.
Qorvo (QRVO) is up more than +1% after Piper Sandler upgraded the stock to overweight from neutral with a price target of $110.
Waste Management (WM) is up more than +1% after Scotiabank upgraded the stock to sector outperform from sector perform with a price target of $250.
Earnings Reports (1/27/2025)
Alexandria Real Estate Equities (ARE), AT&T Inc (T), Brown & Brown Inc (BRO), Nucor Corp (NUE), W R Berkley Corp (WRB).
