Stocks Settle Higher as Megacap Tech Stocks Rally

The S&P 500 Index ($SPX) (SPY) Tuesday closed up +0.92%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.31%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +1.59%.  March E-mini S&P futures (ESH25) are up by +0.75%, and March E-mini Nasdaq futures (NQH25) are up by +1.46%. 

Stocks rallied Tuesday, with the Dow Jones Industrials posting a 7-week high.  Strength in megacap technology stocks and software companies lifted the broader market Tuesday as they recovered some of Monday’s sharp selloff.  Also, some positive earnings results boosted stocks, with Royal Caribbean Cruises Ltd closing up +12% after forecasting full-year adjusted EPS above consensus.  Also, Invesco Ltd closed up more than +8% after reporting better-than-expected Q4 operating revenue.

On the negative side, General Motors closed down more than -8% due to concerns about tariff threats from President Trump.  Also, Lockheed Martin closed down more than -9% after forecasting weaker-than-expected full-year EPS.

President Trump’s comments on tariffs Monday night were negative for stocks when he said he wants to enact across-the-board tariffs “much bigger” than 2.5% on everything from steel and copper to semiconductor chips.

Tuesday’s US economic news was mixed for stocks.  On the positive side, Dec capital goods new orders nondefense ex-aircraft and parts, a proxy for capital spending, rose +0.5% m/m, stronger than expectations of +0.3% m/m.  Also, the Jan Richmond Fed manufacturing survey showed current conditions rose +6 to an 8-month high of -4, stronger than expectations of no change at -10.  Conversely, the Conference Board’s US Jan consumer confidence index unexpectedly fell -5.4 to a 4-month low of 104.1, weaker than expectations of 105.7.

The markets expect the FOMC to keep the fed funds target range unchanged at 4.25%-4.50% when the 2-day FOMC meeting ends on Wednesday.  However, the markets will be interested in the Fed’s view on growth and inflation in Fed Chair Powell’s post-meeting comments.

Earnings season is in full swing as companies report Q4 earnings results.  Megacap technology stocks begin reporting earnings this week, with Microsoft and Tesla reporting on Wednesday and Apple reporting on Thursday.  According to Bloomberg Intelligence, analysts estimate S&P 500 earnings grew by +7.5% y/y in Q4, the second-highest pre-season forecast in the past three years.

The markets are discounting the chances at 1% for a -25 bp rate cut at the January 28-29 FOMC meeting.

Overseas stock markets on Tuesday settled mixed.  The Euro Stoxx 50 closed up +0.14%.  China’s Shanghai Composite Index did not trade Tuesday and will be closed through next Tuesday for the week-long Lunar New Year holiday.  Japan’s Nikkei Stock 225 closed down -1.39%.

Interest Rates

March 10-year T-notes (ZNH25) Tuesday closed down -4 ticks.  The 10-year T-note yield rose +1.5 bp to 4.549%.  Mar T-notes on Tuesday were under pressure as stocks rebounded, which reduced safe-haven demand for T-notes.  Also, Monday night’s comments from President Trump that he wants to raise tariffs across the board at “much bigger” than 2.5% stoked inflation concerns and weighed on T-notes.  Tuesday’s US economic news was mixed for T-notes after Dec capital goods new orders rose more than expected but Jan consumer confidence unexpectedly fell to a 4-month low.  T-notes recovered from their worst levels Tuesday on decent demand for the Treasury’s $44 billion auction of 7-year T-notes that had a bid-to-cover ratio of 2.64, above the 10-auction average of 2.61. 

European government bond yields Tuesday moved higher.  The 10-year German bund yield rose +3.4 bp to 2.565%. The 10-year UK gilt yield rose +2.9 bp to 4.614%.

Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at Thursday’s policy meeting.

US Stock Movers

Megacap technology stocks rallied Tuesday to provide support to the broader market.  Nvidia (NVDA) closed up more than +8% to lead gainers in the Dow Jones Industrias.  Also,  Apple (AAPL) closed up more than +3%, and Microsoft (MSFT) and Meta Platforms (META) closed up more than +2%.  In addition, Amazon.com (AMZN) and Alphabet (GOOGL) closed up more than +1%. 

Software stocks jumped Tuesday on speculation they may be beneficiaries of China’s AI startup DeepSeek.  As a result, Crowdstrike Holdings (CRWD) closed up more than +9% to lead gainers in the Nasdaq 100.  Also, MongoDB (MDB) closed up more than +7%, and Datadog (DDOG) and Palantir Technologies (PLTR) closed up more than +6%.  In addition, Salesforce (CRM) closed up more than +3%, and Atlassian Corp (TEAM) and ServiceNow (NOW) closed up more than +2%. 

Cruise operators rallied Tuesday, led by a +12% jump in Royal Caribbean Cruises Ltd (RCL) to lead gainers in the S&P 500 after it forecast full-year adjusted EPS of $14.35-$14.65, stronger than the consensus of $14.32.  Carnival (CCL) and Norwegian Cruise Line Holdings Ltd (NCLH) closed up more than +7%. 

Invesco Ltd (IVZ) closed up more than +8% after reporting Q4 operating revenue of $1.59 billion, stronger than the consensus of $1.47 billion.

Ciena Corp (CIEN) closed up more than +4% after JP Morgan Chase upgraded the stock to overweight from neutral with a price target of $88. 

Autodesk (ADSK) closed up more than +3% after Mizuho Securities upgraded the stock to outperform from neutral with a price target of $400. 

Vera Therapeutics (VERA) closed up more than +3% after Goldman Sachs initiated coverage on the stock with a buy recommendation and a price target of $58.

RTX Corp (RTX) closed up more than +2% after reporting Q4 adjusted EPS of $1.54, better than the consensus of $1.39

Ecolab (ECL) closed up more than +1% after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $280.

Lockheed Martin (LMT) closed down more than -9% to lead losers in the S&P 500 after forecasting full-year EPS of $27.00-$27.30, weaker than the consensus of $27.82.

General Motors (GM) closed down more than -8% despite reporting a better-than-expected profit outlook due to concerns about tariff threats from President Trump.

Synchrony Financial (SYF) closed down more than -4% after reporting Q4 net interest income of $4.59 billion, below the consensus of $4.62 billion. 

Chip stocks and AI-infrastructure stocks are under pressure today for a second day after China’s artificial intelligence startup DeepSeek appears to provide comparable performance to Western chatbots at a fraction of the price, questions the sky-high valuations for AI-related stocks and the massive research and developmental spending business model.  As a result, Texas Instruments (TXN) closed down more than -3% to lead losers in the Nasdaq 100, and Micron Technology (MU) closed down more than -3%.  Also, Analog Devices (ADI) and Intel (INTC) closed down more than -2%.  In addition, Lam Research (LRCX), Microchip Technology (MCHP), ASML Holding NV (ASML), and Applied Materials (AMAT) closed down more than -1%. 

Polaris (PII) closed down more than -9% after forecasting that 2025 adjusted EPS will fall -65% from 2024 to $1.14, well below the consensus of $3.06.

Sysco (SYY) closed down more than -5% after reporting Q2 adjusted Ebitda of $969 million, weaker than the consensus of $979.5 million.

Graco Inc (GGG) closed down nearly -3% after reporting Q4 adjusted EPS of 64 cents, weaker than the consensus of 76 cents.

Paccar Inc (PCAR) closed down more than -2% after reporting Q4 adjusted EPS of $1.66, below the consensus of $1.70.

Earnings Reports (1/29/2025)

Ameriprise Financial Inc (AMP), Automatic Data Processing Inc (ADP), CH Robinson Worldwide Inc (CHRW), Corning Inc (GLW), Danaher Corp (DHR), General Dynamics Corp (GD), Hess Corp (HES), International Business Machine (IBM), Lam Research Corp (LRCX), Las Vegas Sands Corp (LVS), Lennox International Inc (LII), Meta Platforms Inc (META), Microsoft Corp (MSFT), MSCI Inc (MSCI), Nasdaq Inc (NDAQ), Norfolk Southern Corp (NSC), Otis Worldwide Corp (OTIS), Progressive Corp/The (PGR), Raymond James Financial Inc (RJF), ServiceNow Inc (NOW), Teradyne Inc (TER), Tesla Inc (TSLA), T-Mobile US Inc (TMUS), United Rentals Inc (URI), Waste Management Inc (WM), Western Digital Corp (WDC).