January 27, 2025

After reaching a new all-time high on Thursday, things pulled back a little on Friday as the market still reached a second-straight winning week.

The Dow ended 140 lower to 44,424 led by declines in AXP on earnings, HON, GS and NVDA. The S&P finished down by 17 to 6101 mostly on large technology weakness while the Nasdaq also fell by 99 to 19,954 also on technology selling.

The Russell 2000 Index of small stocks fell by 7 to 2307 while the VIX actually had the nerve to ease back to 14.85 which is not a good sign as on a lower day it should have gone up a bit to create more space between itself and the ultimate downside area of around 13, so we will have to see how this one plays out.

And this low VIX dynamic is leading into a sharp rise today as the various stock index futures are sharply lower due to the potential negative effect of something called “DeepSeek” which is a Chinese version of bringing about cheaper AI applications, which is hurting those stocks here in that area, such as NVDA.

Trading was quiet through the day, aided by relative steadiness in the bond market, which has been driving much of the action lately.

A mostly encouraging start to the 4Q earnings season has also helped prop up the stock market. Even if higher Treasury yields are pushing downward on their stock prices, companies can make up for it by delivering bigger profits and so far those that have reported are beating consensus estimates by 8.7%

TXN fell despite reporting profit for the latest quarter that topped analysts’ expectations.

In a sign of how much pressure is on companies to keep growing, analysts focused on discouraging signals of how much profit the company is likely to make from each $1 of revenue during the first three months of 2025. That helped drag down stocks across the semiconductor industry.

CSX sank even though the railroad delivered a profit for the latest quarter that matched analysts’ expectations. Its revenue for the last three months of 2024 just missed analysts’ forecasts as it dealt with the effects of hurricanes.

On the winning side were NVD’s U.S.-listed shares, which jumped by 8.5%. The Danish company reported results from a clinical trial of a treatment for people who are overweight or obese, which could mean bigger profits in the future.

NEE climbed after the owner of the Florida Power & Light utility reported profit for the latest quarter that was slightly above expectations. Its CEO said his company is benefiting from increased demand for electricity.

Dow component VZ gained a bit as it delivered results for the latest quarter that edged past analysts’ expectations, benefiting in part from price increases imposed in recent quarters, and unveiled a strategy to help businesses use artificial intelligence.

In the bond market, the yield on the 10-year Treasury eased to 4.61% from 4.65% late Thursday. Other yields also pulled lower following a couple of reports on the economy that came in worse than expected.

The U. of Michigan Consumer Sentiment Survey said that sentiment among U.S. consumers is weaker than economists had forecast and fell in January for the first time in six months to 71.1. The drops were widespread, carrying across incomes, wealth and age groups.

A separate preliminary report suggested U.S. business activity is also weaker than expected, with its growth slowing. A third, potentially more encouraging report said sales of previously occupied homes were slightly stronger last month than expected. That capped the weakest year for such sales since 1995.

Traders don’t expect the weak data to push the Federal Reserve to cut its main interest rate on Wednesday.

If they are correct, it would be the first meeting the Fed has done so since it began lowering the federal funds rate in September to take pressure off the U.S. economy. And worries have been rising about stubborn inflation, as well as the effects of potential tariffs and other policies championed by the new President.

This week could be one of the most significant ones due to the large number of companies reporting and also the Fed decision on Wednesday.

So here are the lineups: today - T higher; Tuesday - Dow component BA plus JBLU, GM, LMT, RTX, SBUX; Wednesday - Dow components MSFT and IBM plus META, TSLA, ADP, ASML, TMUS, NFS ; Thursday - Dow components AAPL, CAT, V plus MA, DECK, UPS, LUV; Friday - Dow component CVX plus XOM, ABBV and Novartis.

Economic reports will see: today - December new home sales; Tuesday - December durable goods orders, January Consumer Confidence; Wednesday - F.O.M. interest rate decision; Thursday - weekly jobless claims, first reading on 4Q G.D.P.; Friday - December personal income and spending.

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