1/27-31/25 Weekly Market Recap - Movers, Macro, Monetary, and Fiscal



Week 1/27-31/25

Weekly Market Summary by Aremorph


Summary - Movers, Macro, Monetary, and Fiscal


What a dramatic week in the markets! From the FOMC meeting, to earnings season, to Trump’s implementation of tariffs on our major trading partners, and of course, the “grey” swan event release of DeepSeek AI. Check out below how these events impacted the markets and other news from this week!

Global Weekly Movements

U.S. Equities

  • S&P 500 Index: 6,040.52 (1.20%)

    • The SPX was divided, with energy (-4.02%) and technology (-3.55%) holding back the growth of communication (1.96%) and health care (1.77%). Primarily, AI and related chip making companies took a dramatic hit as China unveiled a significantly cheaper and more powerful open source AI model that outperforms OpenAI’s famous Chat GPT in all metrics. 

  • Dow Jones Industrial Average: 44,544.66 (0.90%)

  • Russell 3000 Index: 3,460.15 (-0.00%)

  • NASDAQ Composite: 19,627.44 (2.05%)

  • Big Movers of the Week 

    • NVIDIA (NVDA): 120.07 (-15.81%)

      • China revealed their AI model DeepSeek, which challenges the power of Chat GPT and other american AI models, for just $5 million dollars of investment, sparking concerns regarding future demand for NVIDIA AI chips.

    • UPS (UPS): 114.23 (-14.13%)

      • UPS earnings released, with 7.23% YoY growth on net income, their stock still plummeted over 14%. Their guidance announcement that they would move away from high volume and low margin shipping with Amazon scared investors, with many Wall st analysts downgrading their ratings for the NTM.

    • Starbucks (SBUX): 107.68 (8.98%)

      • Despite citing a 23.78% decrease in year on year revenue, Starbucks stock rallied under the company turnaround efforts under Brian Niccol. With self-service condiment bars returning and free coffee or tea refills for lingering customers, the atmosphere of Starbucks is beginning to metamorphosize. Just a while back, you had to buy something to use in the bathroom!

    • Royal Caribbean (RCL): 266.60 (14.86%)

      • Net income nearly doubled YoY during earnings reports, significantly shocking investors. Wall st analysts priced heavily bullish in the NTM, helping build investor confidence.

Chinese Equities - Shanghai Composite (SHCOMP): 3,250.60 (-0.19%)

Hong Kong Equities - Hang Seng Index (HSI): 20,075.95 (0.98%)

Japanese Equities- Nikkei 2225 (NI225): 38,529.35 (-2.21%)

European Equities

  • UK Index (UKX): 8,673.96 (2.02%)

  • German Index (DAX): 21,732.05 (2.50%)

Commodities

  • Gold Futures: 2,785.70 (-0.81%)

  • Crude Oil Futures: 73.76 (-0.46%)

U.S. Monetary & Fiscal Policy:

FOMC Meeting: Despite not cutting the federal funds rate, and the reference range remaining at 425-450 bps, Chair Powell was key to elaborate on other pressing issues. The Fed will continue to decrease their securities holdings, and despite inflation easing, it is elevated compared to their target of 2% stable inflation. The Fed is in no rush to alter rates, particularly with new inflationary policy being implemented by Trump. 


Tariff Implementation: Trump just signed an executive order to impose 25% tariffs on Canada and Mexico, alongside a 10% tariff on China. This declaration of a national emergency due to illegal migration and drug trafficking prompted the policy implementation. Canada and Mexico have already sparked discussion of retaliatory measures which would intensify inflation and taxation of red states, not dissimilar to Mexican action during 2019. Economics remain concerned with the inflationary impact these tariffs will have on industries like car manufacturing and agriculture. 


Global Macroeconomic News:

Jobless Claims: Initial jobless claims in the U.S. dropped by 16,000 to 207,000 for the week ending January 25th, well below the expected 220,000. Recurring claims fell by 42,000 to 1,858,000, after reaching a three-year high the previous week. This aligns with the Federal Reserve's view that the U.S. labor market remains strong, supporting the case for prolonged restrictive interest rates.


PCE & Inflation: In December 2024, PCE rose by 0.4%, to 2.6% which echoes the residual inflation effects in the US economy. Personal consumption rose by 0.7%, matching recent consumer sentiment and confidence measures reflecting positive sentiment. This increase in inflation supports the Fed’s recent decision to hold interest rates steady, and in true data driven fashion, wait for a true signal to cut to reveal itself.


DeepSeek Disruption: Chinese startup DeepSeek is causing disruption in the AI sector with its cost-effective AI models, DeepSeek-V3 and DeepSeek-R1, which are said to rival the best models from OpenAI and Meta. The company’s AI models are reportedly 50 times cheaper to use than OpenAI’s models, attracting attention globally. DeepSeek’s founder, Liang Wenfeng, is backed by the quantitative hedge fund High-Fly, and the company’s success has caught the attention of China’s top political circles, signaling its strategic importance. Despite skepticism about its costs and model details, DeepSeek’s rise is challenging the AI dominance of U.S. firms.


Impact of GLP-1: Eli Lilly and Novo Nordisk report earnings this week, investors are focused on signs of peak demand for their obesity and diabetes drugs. Their 2025 sales projections, progress on next-gen weight-loss medications, and strategies to fend off competition from emerging rivals. Since the release of GLP-1, the consumption of fats, carbs, and meats has decreased. Chips & other savory snacks saw over an 11% decrease in consumption volume.


Sources: Google Finance, Market Watch, CME Fedwatch, Yahoo Finance, Reuters, New York Times, Bloomberg, Wall St Journal, Washington Post

Have a great week investing!

Sincerely,
Aremorph

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