Stocks Rise as Oil Falls, Trump Calls for Rate Cuts

New York, January 25, 2025 - Equities ascended toward record highs today as oil prices retreated following President Donald Trump's urging of OPEC to reduce crude prices and his promise to advocate for interest rate reductions.

Market Overview

* The S&P 500 gained 0.3%, topping 6,100 points.
* The Nasdaq 100 remained largely unchanged.
* The Dow Jones Industrial Average surged 0.8%.

Oil Decline Boosts Sentiment

A drop in oil prices, which typically alleviates inflation concerns, pushed the policy-sensitive two-year yield lower. This sentiment was echoed in the broader equity market.

Global Chipmaker Woes

Gains were partially offset by a decline in global chipmakers. SK Hynix's lackluster outlook dampened enthusiasm in the artificial intelligence sector, while ASML Holding NV's concerns over US export controls weighed on the industry. American powerhouses Nvidia Corp. and Broadcom Inc. also experienced losses.

Trump's Davos Speech

At the World Economic Forum in Davos, President Trump stated his intention to request Saudi Arabia and other OPEC nations to "bring down the cost of oil." He reiterated his threat to impose tariffs to boost domestic manufacturing. Additionally, Trump announced the signing of executive actions related to cryptocurrency and AI, but details were not immediately available.

Rate Cuts Expected

Trump's comments regarding interest rates were met with optimism by investors. He indicated that he would demand an immediate rate reduction.

Market Dynamics

* The Bloomberg "Magnificent Seven" gauge of technology stocks slipped 0.2%.
* The Philadelphia Stock Exchange Semiconductor Index declined 0.8%.
* The Russell 2000 rose 0.4%.
* The Bloomberg Dollar Spot Index fell 0.3%.
* The Japanese yen strengthened, with the Bank of Japan anticipated to raise its benchmark rate Friday by the most in 18 years.
* The yield on 10-year Treasuries advanced three basis points to 4.64%.

Market Positioning

Analysts predict a shift toward cyclical stocks, smaller-cap companies, and non-US assets if Trump's pro-growth measures materialize and inflationary pressures recede. However, they note that elevated policy risks persist.

Volatility Ahead

Market volatility is expected ahead of the Federal Reserve's press conference next week and the commencement of earnings season for technology companies.

Corporate Highlights

* American Airlines Group Inc. warned of a surprise loss in the first quarter due to challenges in attracting business travelers and high costs.
* Alaska Air Group Inc. exceeded expectations, forecasting a robust start to 2025.
* Electronic Arts Inc. reported weaker-than-expected financial results due to lackluster sales of holiday titles.
* General Electric Co. surpassed profit and sales estimates, benefiting from reduced supply chain limitations and increased maintenance revenue.
* Union Pacific Corp.'s quarterly earnings exceeded expectations, but its 2025 outlook remained unchanged.
* Freeport-McMoRan Inc.'s copper sales projections fell short of estimates.
* Elevance Health Inc.'s medical costs were lower than anticipated, meeting profit expectations.
* ByteDance is exploring ways to keep TikTok operating in the US without selling its domestic operations.

Key Events

* Bank of Japan policy meeting, Friday
* Eurozone HCOB Manufacturing & Services PMI, Friday
* US University of Michigan consumer sentiment, existing home sales, S&P Global Manufacturing & Services PMI, Friday