Tech Giants Rebound as Earnings Season and Fed Decision Approach
Overview
Leading technology companies surged after a global market selloff, fueled by anticipation of quarterly earnings releases and the Federal Reserve's interest rate decision. Equities rallied, with the S&P 500 gaining 1% and the Nasdaq 100 rising 1.6%.
Technology Sector
Nvidia Corp. rallied 8.9% following a sharp decline that erased $600 billion in market value. Microsoft Corp. reportedly entered talks to acquire TikTok's US operations. The sector rebounded, although most shares in the US equity benchmark fell. Starbucks Corp. gained as sales declines moderated.
Artificial Intelligence Concerns
A market selloff on Monday stemmed from concerns about the potential impact of a low-cost AI model from DeepSeek. However, analysts believe competition fosters innovation and cautious optimism remains.
Megacap Earnings and Fed Meeting
Microsoft, Meta Platforms, and Tesla Inc. are set to report earnings on Wednesday, marking the commencement of the big-tech earnings season. While growth is slowing, profits of the "Magnificent Seven" behemoths are still outpacing the market.
Investors are closely monitoring the Fed's two-day meeting, seeking clarity on inflation and future interest rate decisions. A survey suggests a mixed reaction to the Fed's announcement, with 67% expecting a subdued response.
Market Indicators
The Dow Jones Industrial Average gained 0.3%, and the Russell 2000 added 0.2%. The Magnificent Seven megacaps increased by 2.7%, while the yield on 10-year Treasuries remained steady at 4.54%.
Dip-Buying in Technology ETFs
Despite the selloff, investors poured billions into tech-focused ETFs, betting on a recovery in the sector. The Invesco QQQ Trust Series 1 (QQQ) saw its largest one-day inflow since 2021.
Market Sentiment and Upcoming Events
Despite the AI-driven selloff, many stocks rose on Monday, suggesting resilience beyond the technology sector. Analysts believe the reaction to DeepSeek's news was exaggerated in the short term.
The Fed meeting is expected to be relatively uneventful for the stock market, with options traders anticipating modest price swings in equities. Key events this week include Tesla, Microsoft, and Meta earnings reports, as well as GDP and unemployment data.
Corporate Highlights
* Uber is developing a paid subscription service for commuters to lock in ride prices.
* Starbucks is restructuring its leadership to enhance customer experience.
* Royal Caribbean Cruises expects strong demand and announces entry into the river cruise market.
* Chevron, Engine No. 1, and GE Vernova are partnering to build data center-adjacent power plants.
* Lockheed Martin's 2025 earnings forecast falls short of expectations.
* RTX Corp. is ready to support President Trump's orbital missile defense system.
* Kimberly-Clark's earnings miss expectations amidst challenges.
* LVMH's fashion and leather goods sales decline in the fourth quarter.