US Stocks Rebound from Early Losses
On Wednesday, US stocks initially declined but later recovered, ending the day higher. Earnings reports from Alphabet (GOOG, GOOGL) and AMD (AMD) fell short of expectations, but the tech sector received a boost from Nvidia's (NVDA) surge. The Nasdaq Composite (^IXIC) gained 0.2%, while the S&P 500 (^GSPC) advanced 0.4%. The Dow Jones Industrial Average (^DJI) led the gains, rising 0.7%, or more than 300 points.
Alphabet Earnings Disappoint
Alphabet's stock fell nearly 7% after missing estimates for fourth-quarter cloud revenue. The weak results raised concerns among investors about the pace of return on the company's significant spending on AI.
Nvidia Benefits from AI Spending
Nvidia emerged as a potential beneficiary of Alphabet's spending on AI. Its shares rose over 5%, contributing to the major indexes' recovery from their initial declines.
10-Year Treasury Yield Declines
The 10-year Treasury yield (^TNX) fell nine basis points to 4.42%, its lowest level since December 2024. This decline in bond yields supported interest rate-sensitive sectors such as Real Estate (XLRE).
AMD's Earnings Mixed
AMD's earnings provided mixed signals on the AI trend. While the chipmaker posted a quarterly revenue beat, a disappointing data-center sales forecast raised worries about slowing AI growth. AMD shares tumbled over 6%.
Tech Concerns Linger over US-China Trade Tensions
Big Tech companies like Alphabet are facing scrutiny over the ongoing US-China trade dispute, which is seen as a risk to tech and chip stocks alike. Apple (AAPL) shares initially fell about 2% before recovering after Bloomberg reported that Beijing is considering targeting its app store in an antitrust probe.
Fed Officials Unmoved by Trump Tariffs
Federal Reserve officials have expressed a cautious approach to the recent tariff announcements by President Donald Trump. Fed vice chair Philip Jefferson and San Francisco Fed president Mary Daly stressed the need for a measured response, while other officials indicated a willingness to wait and see.
Big Tech Capital Expenditures Surge
Meta (META), Microsoft (MSFT), and Alphabet are expected to spend a collective $228 billion on capital expenditures in 2025, driven by their investments in AI infrastructure. However, investors remain uncertain about the timeline for returns on this spending and the justification for such high levels of expenditure.
Trump Tariffs Threaten Housing Affordability
Tariffs promised by President Trump could increase home-building costs, which may be passed on to buyers. Data suggests that such increases could lead to higher monthly housing payments, affecting affordability for many potential buyers.
Activity in Services Sector Slows
Activity in the US services sector continued to expand in January, but at a slower pace than in previous months, according to the Institute of Supply Management. The services index fell from 54.1 in December to 52.8 in January, indicating a potential loss of momentum due to concerns over tariffs.
Alphabet's Cloud Disappoints, Shares Fall
Alphabet's stock fell more than 8% after the company reported quarterly results. The cloud segment's revenue missed estimates, and the company significantly increased its planned capital expenditures. These developments, coupled with concerns over China's antitrust probe, weighed on Alphabet's shares.
Disney Earnings Beat, Streaming Profit, Parks Hit
Disney (DIS) reported first-quarter earnings that beat expectations. The media and entertainment giant posted a profit in its streaming segment, but its parks business faced challenges due to hurricanes and cruise ship investments. Disney+ subscriber growth declined, although the company expects this trend to stabilize in the current quarter.
Apple Probed by China, Shares Slide
Apple (AAPL) shares fell ahead of the market open after it emerged that China is investigating the company's App store fees. The probe is seen as a retaliation to US tariffs on Chinese goods and raises concerns about potential antitrust scrutiny for Apple in China.