January 29, 2025

In one of the classic “Turnaround Tuesday’s” of all time, the market made a dramatic recovery from Monday’s downside disaster in the S&P and Nasdaq, and even the Dow added to its strange gains from the day before.

And following the traditional pattern, things got off to a bit of a shaky start, as nominal early gains were followed by a small drop, which then straightened itself out and from there kept pushing and pushing to the upside right until the end.

As a result, the Dow ended with a 136 point gain to 44,850 led by advances in CRM, GS, MSFT and NVDA, the last two making strong rebounds from the previous day’s downside disaster. And sure enough, those that buyers couldn’t stay away from on Monday, dropped once again as usual, such as JNJ and PG, in addition to that awful PEP.

The S&P ended with a strong 55 point gain to 6067, a day after they tumbled on doubts about whether the artificial-intelligence frenzy really needs all the dollars being poured into it. As a result, it gained back about half of its Monday decline.

The Nasdaq was the big hero as it rallied by 2% after sliding by 3.1% from the day before with a gain of 392 to 19, 733 with the large technology stocks leading the way higher..

NVDA became the hero, whose chips are powering much of the move into AI and whose stock has become a symbol of the surrounding frenzy. It rose 8.8% after plunging nearly 17% the day before, which was its worst drop since the 2020 COVID crash.

Other AI-related companies also held steadier, including chip company AVGO, CEG gained after plummeting nearly 21% on Monday. It had earlier rallied on expectations it will help supply the electricity that vast AI data centers would need..

Such revenues are threatened after DeepSeek, a Chinese company, said it was able to develop a large language model that can perform as well as big U.S. rivals but at a fraction of the cost. That raises questions about whether all the spending expected for AI chips and electricity will need to happen.

AI-related stocks have been the biggest stars in recent years, soaring on expectations that big spending will only continue to grow. The gains, though, also created criticism that their stock prices had simply gone too high, too fast.

It is still uncertain how much DeepSeek’s development will upend the AI industry. While it could mean less growth in spending than expected for data centers, electricity and chips, it could also boost other areas.

One analyst said that “If AI becomes less expensive to use, we think businesses will adopt it more quickly, making a greater investment in AI software” We think this acceleration in adoption could mean a rise in software investment that offsets – or even dwarfs – any deceleration in spending on data center structures, hardware and related investment.”

And how about AAPL, which has recently made the constant downgrading of it by many analysts look off base so far as it rallied strongly for the second day, coming off of its low last week of just over 220 to its current level of 238 ahead of its earnings Thursday evening.

RCL jumped 12% higher to a new high after the cruise operator topped analysts’ profit expectations for the end of 2024. It benefited from stronger-than-expected demand from customers booking trips closer to the time of departure. The company also gave a profit forecast for the first three months of 2025 that topped analysts’ expectations.

On the other hand, JBLU lost a quarter of its value, 26% despite reporting a milder loss for the latest quarter than analysts expected. The company expects its costs outside of fuel to rise more quickly at the start of 2025 than a key underlying measure of its revenue.

In the bond market, which had been driving much of the action before Monday’s upheaval, Treasury yields held relatively steady.

The yield on the 10-year Treasury remained at 4.53%, where it was late Monday. It has been climbing in recent months as traders pared back expectations for how many cuts the Federal Reserve will deliver to short-term interest rates this year. The economy remains solid, and worries are high that tariffs and other policies potentially coming from the President could put upward pressure on inflation.

The January Consumer Confidence report rose to 104.1 was not  as strong as economists expected made relatively small waves in the bond market.

The widespread expectation is that the Fed will leave the funds rate alone. If that proves true, it would be the first meeting where they did not cut rates to give the economy a boost since it began doing so in September.

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, plus the DeepSeek situation.

So here are the lineups: yesterday -  GM, LMT, PCAR, JNPR,  JBLU lower and RCL, RTX and Dow component BA higher; today - SBUX, QRVO, FFIV, GPI, ASML higher; tonight - Dow components MSFT and IBM plus META, TSLA, ADP, 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: yesterday - preliminary December durable goods orders down by 2.2% but higher when transportation is excluded, January Consumer Confidence rose to 104.1, January Richmond Fed Index fell by only -4; today  - F.O.M.C. interest rate decision at 2pm; Thursday - weekly jobless claims, first reading on 4Q G.D.P.; Friday - December personal income and spending.

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