Schwab Market Update

Stocks Up After Tech Dive, but Fed, Earnings Loom

January 28, 2025 Joe Mazzola
Major indexes clawed to slight gains, but DeepSeek worries still pervade after Monday's sell off. Mega cap earnings and a Fed meeting approach and yields rose on tariff threats.

Published as of: January 28, 2025, 9:22 a.m. ET

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The markets Last price Change % change
S&P 500® index 6,012.28 -88.96 -1.46%
Dow Jones Industrial Average® 44,713.58 +289.33 +0.65%
Nasdaq Composite® 19,341.83 -612.47 -3.07%
10-year Treasury yield 4.56% +0.04 --
U.S. Dollar Index 107.90 +0.56 +0.52%
Cboe Volatility Index® 17.81 -0.09 -0.07%
WTI Crude Oil $74.00 +0.83 +1.13%
Bitcoin $102,688.07 +1,838.55 +1.82%

Major index values are as of Monday's close; others are as of 8:57 a.m. ET.

(Tuesday market open) DeepSeek's alarm bell still echoed Tuesday ahead of tomorrow's Microsoft (MSFT) and Meta Platforms (META) earnings, but most of the market took the news in stride and even Nvidia (NVDA) rose slightly overnight after its 17% plunge. The Federal Reserve meeting begins today with traders building in little chance of a rate move, keeping mega cap earnings front and center.

"This week's earnings results from mega cap tech—and perhaps more importantly how they position their recently announced ramp-up in AI CapEx spending—will be subject to higher scrutiny following claims from China's DeepSeek," said Nathan Peterson, director of derivatives analysis at the Schwab Center for Financial Research. Revenue guidance could be pivotal considering high expectations and growing capital expenditures.

The 10-year Treasury note yield rose this morning after posting its lowest close in a month Monday, with today's rebound in yields and the dollar possibly reflecting President Trump's remarks warning of possible tariffs on copper and aluminum. There's a 7-year Treasury auction later today. Technically, the S&P 500 index (SPX) appeared to find support at its 50-day moving average of 5,981 yesterday, and one level to watch above is 6,020, which roughly correlates with the early January high.

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Three things to watch

  1. DeepSeek, wide impact: Yesterday's sell-off wasn’t limited to equities. Bitcoin also retreated more than 7% from Friday's close, down to an intraday low of $97,650, before bouncing off its own 50-day MA and closing at $101,430. Volatility has certainly picked up in bitcoin with an ATR (Average True Range, a volatility indicator used in technical analysis) now above $5,200. Gold also fell sharply on ideas that cheaper AI could help bring down inflation, and crude oil dropped amid talk that lower AI costs could curb projected demand growth for energy use associated with the technology. However, some AI-related stocks jumped following the news, including Meta. This could reflect ideas that Meta and other software firms might be able to accomplish their AI goals more cheaply if technology like DeepSeek becomes widely available and meets early expectations.
  2. Behind the sell off: Yesterday's plunge, mainly limited to tech, might have been exacerbated by trader positioning. Much of the hedging placed ahead of recent inflation data had dissipated, and positive sentiment rose last week. DeepSeek and U.S. trade policy moves against Colombia caught some traders off balance, and Monday ended up being a case study in what happens when sentiment flips. Defensive positioning weighed on yields and showed up in other places, too. Apple (AAPL) found buyers Monday. In past tech downturns, mega caps sometimes rose on ideas that their large cash holdings and market share might protect them from market storms, though that's not guaranteed.
  3. Revival ahead for "soft" data? This morning brings January consumer confidence from the Conference Board. The December reading fell slightly. Consensus for the headline January figure is 106, up from 104.7 last time, according to Trading Economics. Recently, so-called "soft" data such as consumer confidence and other sentiment numbers have lagged versus "hard" data like employment and gross domestic product, where there's been more resilience, but that may be changing.  "If anything, a coming recovery in soft data would likely be warranted, considering the hard data's resilience," said Liz Ann Sonders, Schwab's chief investment strategist, and Kevin Gordon, director, senior investment strategist at Schwab, in a recent analysis. "With the economy growing at a respectable pace over the past couple years, it's clear that the persistent malaise in several soft data metrics hasn't been fully justified."

On the move

  • Nvidia and Broadcom (AVGO) rose 2.5% and 3.3%, respectively, ahead of the open, after both fell 17% yesterday on DeepSeek-related fears. Energy firms, which also plunged on worries there'd be less AI-related power demand, also clawed back this morning. Vistra (VST) rose 4.4%.
  • Crypto-related names like MicroStrategy (MSTR) and Coinbase (COIN) were roughly flat in pre-market trading following losses yesterday that could be chalked up to investors getting defensive and selling off bitcoin in the wake of DeepSeek.
  • General Motors (GM) shares were flat in early action despite surpassing analysts' consensus for earnings per share and revenue and providing upside guidance. The company did warn of "uncertainty over trade, tax, and environmental regulations."
  • Lockheed Martin (LMT) shares dropped 3.3% after earnings beat analysts' estimates but revenue fell slightly short. Revenue guidance looked slightly above consensus for 2025, but the company projected slightly lower-than-expected 2025 earnings per share. Concerns in the defense industry now center on the new U.S. administration's cost-cutting goals.
  • Royal Caribbean (RCL) rose more than 4% in pre-market action following better-than-expected quarterly profits. "The company continues to be encouraged by the demand and pricing environment," RCL said in its earnings release. "Bookings have accelerated since the last earnings call."

More insights from Schwab

Any tariffs could be less draconian than ones proposed during the campaign, as tariff proposals "may simply be negotiation tools leading toward agreements with China and other countries," wrote Jeffrey Kleintop, chief global investment strategist at Schwab. Still, there are good reasons to be cautious about trade issues and their potential impact.

Any tariffs could be less draconian than ones proposed during the campaign, as tariff proposals "may simply be negotiation tools leading toward agreements with China and other countries," wrote Jeffrey Kleintop, chief global investment strategist at Schwab. Still, there are good reasons to be cautious about trade issues and their potential impact.

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Any tariffs could be less draconian than ones proposed during the campaign, as tariff proposals "may simply be negotiation tools leading toward agreements with China and other countries," wrote Jeffrey Kleintop, chief global investment strategist at Schwab. Still, there are good reasons to be cautious about trade issues and their potential impact.

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Any tariffs could be less draconian than ones proposed during the campaign, as tariff proposals "may simply be negotiation tools leading toward agreements with China and other countries," wrote Jeffrey Kleintop, chief global investment strategist at Schwab. Still, there are good reasons to be cautious about trade issues and their potential impact.

Cuts looming? The Bank of Canada and European Central Bank each could cut rates 25 basis points this week. "Headline inflation in Germany and France is likely to have eased a touch in January, further supporting the outlook for more rate cuts this year in Europe," Kleintop said in his weekly market outlook.

Powell awaited: Fed Chairman Jerome Powell's remarks tomorrow may be anticlimactic. "The best guess is he's just going to try and punt on most of the hypothetical questions," said Kathy Jones, chief fixed income strategist at Schwab, in the latest Schwab OnInvesting podcast. "I don't know what else he can say at this stage of the game, given the level of uncertainty about what policy is actually going to evolve into." It might get interesting, however, if Powell fields any questions about the Fed's balance sheet and whether there are enough reserves in the banking system.

Chart of the day

Three-month S&P 500 chart. Index tested its 100-day moving average near 5,858 and bounced off of it earlier this month. Yesterday saw the index bounce off the 50-day MA of 5,981 to finish above 6,000. It has risen from a low of 5,696 in November.

Data source: S&P Dow Jones Indices. Chart source: thinkorswim® platform.

For illustrative purposes only. Past performance does not guarantee future results.

Yesterday's plunge in the S&P 500 index (SPX—candlesticks) briefly took the index below its 50-day moving average (blue line) of 5,981, but losses there weren't sustained and the SPX ended up closing near its high for the day above 6,000. That could be a positive momentum indicator. Any drops below the 50-day could set up a test of the more important 100-day moving average (red line) near 5,858, which marked a support area on the earlier January sell-off.

The week ahead

Check out the Investors' Calendar for a summary of the top economic events and earnings reports on tap this week.

January 29: Expected earnings from Microsoft (MSFT), Meta Platforms (META), and Tesla (TSLA).
January 30: Fourth quarter gross domestic product (GDP) first estimate and expected earnings from Intel (INTC), Visa (V), Apple (AAPL), Caterpillar (CAT), and Mastercard (MA).
January 31: December PCE prices, December personal spending, December personal income, and expected earnings from AbbVie (ABBV), ExxonMobil (XOM), and Chevron (CVX).
February 3: January ISM Manufacturing PMI® and expected earnings from Palantir (PLTR).
February 4: December Job Openings and Labor Turnover Survey (JOLTS), and expected earnings from Merck (MRK), Pfizer (PFE), PepsiCo (PEP), Alphabet (GOOGL), and Advanced Micro Devices (AMD).

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