Major indexes closed lower Friday as stocks retreated late in the session after the White House said tariffs on Mexico, Canada and China will take effect Saturday.
The DJIA fell by 0.75% though it saw a modest increase of 0.30% last week, while S&P 500 decline by 0.50% on Friday (31 Jan) making it fell 1.0% for last week, NASDAQ also decreased by 0.28% with a weekly drop of 1.6%. Russell 2000 experienced a 0.9% loss for the week.
The major indexes managed to post gains for the month, despite a roller-coaster last week of trading fueled by corporate results, the Federal Reserve's latest decision on interest rates and the revelation that Chinese startup DeepSeek had launched a highly effective, low-cost AI model.
The week began with a sharp decline due to attention on China's AI platform DeepSeek, which is noted for its efficiency compared to alternatives like ChatGPT. This raised concerns about the competitiveness of companies in the AI sector and potential changes in capital spending plans.
Friday late session decline was seen after White House press secretary Karoline Leavitt told reporters Friday afternoon that the Trump administration will impose 25% tariffs on Mexico and Canada, and a 10% rate on China. The news appears to end a period of doubt over whether President Donald Trump would follow through on his campaign promise of wide-ranging tariffs. Investors worry that the tariffs could take a heavy toll on certain industries, while potentially spurring inflation.
Major indexes had spent much of Friday in positive territory as investors digested a barrage of earnings reports and a benign reading on a closely followed inflation indicator.
Latest Personal Consumption Expenditures index (PCE) Show Inflation Accelerate In Dec
On the economic data front, the Personal Consumption Expenditures index, which is the Fed's preferred inflation gauge, showed that inflation accelerated in December, though the number was in line with economists' expectations. The Fed earlier this week opted to leave its influential fed funds rate unchanged, after having cut it by a full percentage point since September, as the economy has continued to show strength and inflation remains stubborn.
This has caused the CME Watch Tool for rate cut probability to drop from 27% one week ago to 16.0% and then 15.5% at time of this writing. This show that Fed would keep the rate unchanged for some time.
S&P 500 Communication Services Only Significant Winner
Only two sectors managed to close in the green for the S&P 500 sectors, shares of major technology companies, which endured an especially volatile week, closed mostly higher, with two notable exceptions. Apple (AAPL) fell 0.7% despite reporting better-than-expected earnings, while AI chipmaker Nvidia (NVDA), which has been particularly hard hit in the wake of the DeepSeek news, slid 3.7%. Among noteworthy post-earnings movers, Intel (INTC) shares slumped nearly 3% after the beleaguered chipmaker reported a narrower-than-expected loss for the fourth quarter but issued a disappointing outlook. This caused the information technology sector to lose ground with 0.79% loss.
Microsoft (MSFT), Alphabet (GOOGL), Amazon (AMZN), Meta Platforms (META), Tesla (TSLA) and Broadcom (AVGO) gained ground. The gains from $Electronic Arts(EA)$ and $Alphabet(GOOG)$ helped the communication services sector to provide a significant gain (0.74%) despite weak market performance after the late session retreat on Friday.
Atlassian (TEAM) shares soared 15% after the software company issued an upbeat revenue outlook amid robust demand for its AI products. Pharmaceutical giant AbbVie (ABBV) rose nearly 6% after releasing strong earnings, while oil majors Exxon Mobil (XOM) and Chevron (CVX) retreated 2.5% and 4.6%, respectively. This caused the energy sector to be the worst lagger with a 2.74% loss.
Note Yield Jump After News On Tariffs
The yield on the 10-year Treasury, which is correlated with expectations about where interest rates are headed, was at 4.54% in recent trading, up from 4.51% at yesterday's close. The yield jumped as high as 4.58% after the news on tariffs.
Stocks To Watch
The Trump administration announced that tariffs on Canada, Mexico, and China will go into effect on 01 Feb, impacting various sectors. $Chevron(CVX)$ experienced a significant drop, falling 4.6% after reporting its first quarterly loss in its refining business since 2020, partly due to these tariffs. The energy sector overall saw a decline, with Chevron seeking to maintain its operations in Venezuela amidst geopolitical tensions.
$Apple(AAPL)$ has decided to cease efforts on its advanced augmented reality glasses project, code-named N107, which was initially intended to pair with its devices. The decision came after attempts to redesign the product and connect it to a Mac failed to meet expectations during executive reviews. This move reflects strategic shifts as Apple focuses on other technology initiatives.
$Palantir Technologies Inc.(PLTR)$ is set to report its Q4 earnings, with analysts expressing mixed views on its growth prospects. While some see potential in its AI platform, others caution about the challenges of maintaining accelerating growth. The company's strategic direction will be closely watched by investors.
If we looked at the technicals on PLTR, we could be seeing a quite wide move after its earnings after the market close. I am expecting a move up to the bottom top of 12% either direction. Investors are separated between believing in the growth prospect versus maintaining the accelerating growth.
I would think that it might come down to the future guidance of PLTR valuation metrics, it is currently very high so this means that earnings results for this quarter should be amazing but again it will be upon the guidance.
If they can raise the median Revenue Target expansion through the next couple of years, and happen that PLTR raise it for the consensus right now then we could be seeing a more normalized rate of Revenue growth of 18% per year.
But if the growth comes in either in line or in an underperformance, PLTR could be seeing a nose dive of 12%, but if it goes the other way, we could see an upside to put PLTR into the $90 range and next Target will be that $100 psychological.
So the 12% of the downside will undo most of this daily uptrend rally as we have seen nice daily uptrend. That would bring us down below towards the $70 to $72 range.
Occidental Petroleum (OXY) faced a downgrade from Goldman Sachs, citing a focus on deleveraging over capital returns. This strategic priority has led to investor caution, with expectations that capital returns will resume once balance sheet improvements are achieved.
Summary
Stocks declined late Friday after the White House confirmed the imposition of tariffs: 25% for Canada and Mexico, and 10% for China, starting 01 February.
Despite hints of possible negotiations to mitigate the tariffs, the market remained largely unaffected. But we will need to see some sector which might undergo a rotation with many big tech earnings coming up this week, there might be a possibility of investors shifting to this sector.
Appreciate if you could share your thoughts in the comment section whether you think market would experience a sector rotation this week.
@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.
Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.
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