1. DeepSeek Sparks Panic in Tech Stocks
China’s AI startup DeepSeek claimed to have developed an advanced AI model for just $5.6 million, triggering a sell-off in U.S. technology stocks. Nvidia was hit hardest, plunging 17% in a single day and losing $593 billion in market value—the largest single-day decline in history. The stock closed below its 200-day moving average for the first time in over two years.
Key Takeaway: The market remains highly sensitive to perceived threats in AI development, particularly from China.
2. Markets Show Mixed Performance
Despite a rocky start, major indexes posted positive results in January. The S&P 500 and Nasdaq fell by 1.0% and 1.6%, respectively, while the Dow recorded a fractional gain. However, January ended strong, with the Dow up 4%, the S&P 500 gaining nearly 3%, and the Nasdaq rising by 2%.
Key Takeaway: Market volatility persists, but January’s gains suggest continued investor confidence.
3. U.S. Economic Growth Moderates
GDP expanded at an annual rate of 2.3% in Q4 2024, slightly below expectations. Full-year GDP growth stood at 2.8%, marginally under 2023’s 2.9% figure.
Key Takeaway: The economy remains in growth mode, though at a slightly slower pace.
4. Earnings Season Exceeds Expectations
Corporate earnings are surpassing forecasts, with Q4 net income expected to rise by 13.2%—the fastest growth rate in three years. Analysts had initially projected an 11.8% increase.
Key Takeaway: Strong earnings momentum could provide a tailwind for equity markets.
5. The Fed Holds Rates Steady
As expected, the Federal Reserve kept its benchmark interest rate unchanged, citing inflation concerns. Meanwhile, the European Central Bank approved its fifth consecutive rate cut.
Key Takeaway: The Fed remains cautious, balancing inflation risks with economic stability.
6. Gold Hits Record High
Gold prices surged more than 1% this week, surpassing $2,800 per ounce for the first time. The previous record was set three months ago, and the metal has risen sharply from the $2,000 level a year ago.
Key Takeaway: Rising gold prices signal strong demand for safe-haven assets.
7. Meta and Microsoft Post Record Results
Meta’s Q4 revenue jumped 21% YoY to $48.4 billion, with net income up 49% to $20.8 billion. Microsoft reported record revenue of $262 billion and net income of $93 billion in 2024, marking significant long-term growth.
Key Takeaway: Tech giants continue to dominate earnings season with strong profitability.
8. Tesla and Apple: High Valuations Despite Slower Growth
Apple’s revenues have increased just 5% over the past three years, while net income has declined 4%. Yet, its stock price is up 41%, driven by valuation expansion. Tesla showed a similar trend, with a 63% stock gain in 2024 despite only 1% revenue growth.
Key Takeaway: Market sentiment continues to drive valuations, even amid modest financial performance.
9. Housing Market Cools as Sales Slow
The average U.S. home now takes 54 days to sell—the longest duration since March 2020. Affordability remains a challenge, despite home prices rising just 3.8% over the past year.
Key Takeaway: Higher interest rates and affordability concerns are slowing the housing market.
10. Government Looks to Cut Spending
Efforts to reduce spending have reportedly saved $1 billion per day, with a goal of cutting $3 billion daily. Meanwhile, U.S. interest payments on national debt hit a record $1.12 trillion in 2024, now exceeding defense spending.
Key Takeaway: Deficit reduction efforts are crucial as interest costs on debt soar.
11. Tariffs Used as a Political Tool
Recent trade disputes with Colombia and Mexico were swiftly resolved after tariff threats. Colombia agreed to accept deported migrants, while Mexico deployed 10,000 troops to curb drug trafficking in response to U.S. tariff actions.
Key Takeaway: Tariffs are being leveraged as a key tool in U.S. foreign policy negotiations.
12. Notable Market Trends
- Office property delinquency rates hit a record 11%.
- Apple has repurchased $673 billion in stock over the past decade.
- A record 10.75% of U.S. credit card holders are making only minimum payments.
Key Takeaway: Debt pressures are rising, affecting both corporate and consumer financial health.Next week, markets will focus on labor market data and any signals from the Fed regarding future rate adjustments.
