January 31, 2025

The market ended higher yesterday, as it was helped by gains in META, TSLA and Dow component IBM as many companies reported, along with economic reports, but there was plenty of volatility along the way.

The Dow ended with a gain of 168 up to 44,882 led by advances in BA, SHW, GS, UNH and V, the latter on earnings, but was held back by a large earnings-related loss in MSFT and also by AMZN.

The S&P did better with a 32 point gain to 6071 with help from most large cap techs but restrained somewhat by those losses in MSFT, AMZN and NFLX. The Nasdaq was held back with only a 49 point advance to 19,681 once again with those tech losses restraining the upside.

The Russell 2000 Index made a better gain of 24 to 2303 by a nice showing in the banks while breadth numbers overall were very strong to the upside on an 80% advance while the VIX naturally declined back to 15.84.

META helped push indexes higher after rising as the company behind Facebook and Instagram delivered a better profit for the end of 2024 than analysts expected. Perhaps just as importantly for the market, it also talked up its AI efforts and said it will continue to invest in the space.

That calmed some of the worries created by the Chinese upstart Deep seek when it said it developed a large language model capable of competing with the world’s best, without having to use top-flight chips. That raised questions about whether all the investment expected for AI chips, data centers and electricity is really needed and sent a shock through markets at the start of the week.

The AI boom has been a primary reason for the U.S. stock market’s run to ongoing records in recent years, and the threat has hit stocks like NVDA particularly hard. The chip company that has become the symbol of the AI frenzy spent most of Thursday lower, but turned around late in the day and was one of the strongest forces lifting the S&P.

Keeping indexes in check was MSFT which fell by 6% even as it topped analysts’ expectations for profit in the latest quarter, but the focus was instead on the slower-than-expected growth in its cloud computing business, which is a centerpiece of its AI efforts.

The C.E.O. also continued to talk up AI following the Deep seek  disruption.

“Deep seek had some real innovations,” he said, and it is good to have efficiency gains and lower prices in AI development because it “means people can consume more and there’ll be more apps written.”

Treasury yields have been climbing amid fears that inflation may remain stubbornly above the Federal Reserve’s 2% target. A solid U.S. economy and worries about tariffs and other policies potentially coming from the new President Trump have been some of the reasons behind the rise. In fact, later in the session both the Dow and S&P momentarily lost all of their gains for a while before recovering them at the close on reports that the administration plans to impose 25% tariffs on both Canada and Mexico starting this weekend.

Treasury yields held relatively steady Thursday after a report indicated that the first estimate of 4Q G.D.P. grew by 2.3% which was slightly slower than economists expected. The 10-year Treasury yield edged down to 4.52% from 4.53% as a result.

Yields felt some downward pressure after the E.C.B. cut its main interest rate in hopes of boosting the region’s stagnant economy.

TSLA recovered from its bizarre after-market pattern where on Wednesday after its report, it plunged by 15 dollars and then reversed to the upside even though it reported a weaker profit for the latest quarter than analysts expected. It then reversed back to the upside after its C.E.O. asserted that it would offer unsupervised “full self-driving” technology to its customers as a paid service starting in Austin in June. So the market makers who sold to customers on the initial negative downside reaction really made out very well, don’t you think?

Dow component IBM rallied 13% after beating analysts’ expectations for profit. The company pointed out that  it has a  growing book of generative AI business and said the company expects its overall revenue to grow at least 5% this year.

UPS fell by 14% despite topping analysts’ expectations for profit. The package delivery company said its largest customer, Amazon, would lower its volume by more than 50% by the second half of 2026.

AAL fell in its first trading following a crash outside Washington as the cause of Wednesday night’s midair collision is under investigation.

Earnings results show: yesterday  -  Dow components MSFT, CAT and WHR, LEVI, UPS lower, CMCSA and Dow components IBM, V plus META, TSLA, LVS higher; today - DECK, BOOT, PPG, TT, Dow component CVX lower and TEAM, VRTX, AMP and Dow components AAPL, INTC plus XOM, ABBV higher.

Economic reports will see: yesterday - weekly jobless claims slipped to 307,000, first reading on 4Q G.D.P. showed a gain of 2.3%; today - December personal income up by 0.4% and spending higher by 0.7%.

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