Morning Bid Americas: Deep breath after AI jolt, Trump tariffs rumble

Sysco

28/01/2025 11:15

A look at the day ahead in U.S. and global markets from Mike
Dolan
Markets took a deep breath on Tuesday after Wall Street's shock
start to the week, with the emergence of cheap Chinese
artificial intelligence rival DeepSeek lopping more than half a
trillion dollars off what had been America's most valuable firm
Nvidia.
    The tech swoon clocked some impressive milestones and the
long-standing concentration of megacap stocks in S&P500 at large
dragged broader indexes down sharply. 
    Nvidia's  NVDA.O  17% one-day drop marked the biggest loss
in market capitalisation for a single stock ever, outstripping
its own record from last September. The 9% drop in US chipmakers
 .SOX  was the biggest in almost four years and the Nasdaq's 3%
was its biggest loss of the year so far.
    Perhaps most curiously, power companies, which are expected
to see higher demand from energy-intensive data centers needed
to develop AI, also fell sharply. Vistra  VST.N  dropped 28.3%
and Constellation Energy  CEG.O  fell 20%.
    Keeping it all in context, however, Nvidia's relegation from
biggest to third most valuable firm merely brought its stock
back to October levels - still 94% higher than it was a year
ago. 
    Even though the S&P500  .SPX  had its biggest daily loss in
a couple of weeks, the equal-weighted version of the index
 .EWGSPC  that evens out distortions of the handful of megacaps
actually edged higher on the day and 70% of the index's stocks
rose on Monday.
    Apple  AAPL.O , which retook the top valued firm slot from
Nvidia and which reports quarterly earnings on Thursday, was up
3% on Monday.
    So, an unnerving day for what has been the dominant AI theme
around the world over the past 18 months - but not all as
terrible as it seemed. U.S. AI developers welcomed the DeepSeek
readout and model and even U.S. President Donald Trump merely
characterised it as a wakeup call to U.S. tech firms. 
    That said, the DeepSeek development reintroduces obvious
questions from last summer about whether the scale of the
investment spend was warranted and that will now be looked at
forensically again through the unfolding earnings season. 
    Before Apple tees up on Thursday, Microsoft, Tesla and Meta
report earnings tomorrow.
    With mainland Chinese markets closed from today for the
lunar new year holiday, fresh news on the saga is likely to be
thin for a bit.
    Ahead of Tuesday's bell, U.S. stock futures appeared to find
their feet, with Nasdaq  NQcv1  up 0.7% and S&P futures  ESc1 
up 0.4%. Nvidia bounced about 6% out of hours.
    The ripples overseas were limited too - with Japan's Nikkei
 .N225  caught in Monday's tech slipstream and underperforming
with a loss of 1%. European stocks  .STOXX , by contrast, were
up 0.7% to a new intraday record and Hong Kong  .HSI  was also
marginally higher.
    One eye-catching aspect of Monday's shakeout was the degree
to which it hit U.S. Treasury yields and Federal Reserve
futures.
    With the Fed kicking off its latest two-day policy meeting
today and widely expected to stand pat as it assesses the
policies of the new Trump administration, rate futures reacted
to tech wobble by moving to fully price two rate cuts this year.
    January consumer confidence readings top today's economic
data diary.
    Two-year Treasury yields  US2YT=RR  followed suit, plunging
back below 4.2% for the first time in more than a month and
10-year yields  US10YT=RR  dipped below 4.5% for the first time
this year. Both have ticked back higher early on Tuesday as
equity markets stabilised.
    The dollar  .DXY  reacted likewise, falling to new year lows
during Monday's upheaval but regaining ground today.
    Helping that dollar bounceback was a re-boot of Trump tariff
fears.
    Even though newly confirmed U.S. treasury Secretary Scott
Bessent was reported to be pushing for a modest universal tariff
hike of just 2.5%, Trump responded to that by further sweeping
tariff threats on copper and aluminium imports.
    And in what seemed like another night of seemingly endless
Trump commentary, the new President told reporters he thought 
Microsoft  MSFT.O  was in talks to acquire TikTok and that he
would like to see a bidding war over the app.
    Elsewhere, HSBC's stock  HSBA.L  slipped as the bank said it
would wind down its M&A and equities businesses in Europe,
Britain and the Americas - signalling its biggest retrenchment
from investment banking in decades and an acceleration of its
shift to Asia.   
     
       Key developments that should provide more direction to
U.S. markets later on Tuesday: 
* US January consumer confidence, December durable goods orders,
November house prices, Richmond Federal Reserve Jan business
surveys, Dallas Fed service firms survey
* US Federal Reserve's Federal Open Market Committee starts
two-day meeting
* US corporate earnings: Boeing, Starbucks, Kimberly-Clark,
Sysco, Lockheed Martin, General Motors, Invesco, Stryker, Chubb,
Packaging Corp of America, Royal Caribbean Cruises, Paccar,
Synchrony, RTX, BXP, F5 
* US Treasury sells $44 bln of 7-year notes, $30 bln 2-year
floating rate notes 

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Nvidia falls sharply as DeepSeek triggers an AI market downturn 
  https://reut.rs/42rXHN9
Magnificent Seven versus the market    https://reut.rs/4jrW34d
US Financial Conditions Easiest in 3 years    https://tmsnrt.rs/4geE52f
Where investors think the Fed is headed    https://reut.rs/40NH5OD
ASML sales to customers in China    https://reut.rs/4d2Sldm
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (By Mike Dolan, editing by Ed Osmond
mike.dolan@thomsonreuters.com)
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