Last weekly recap>> The stock market may be hurt the most by Trump’s tariffs after January's rally
The $.SPX(.SPX)$ and $NASDAQ 100(NDX)$ declined by 0.99% and 1.35% last week as DeepSeek rattled the stock market.
Major market movers included $NVIDIA(NVDA)$ (-15.8%), $Microsoft(MSFT)$ (-6.5%), $Broadcom(AVGO)$ (-9.6%), $Oracle(ORCL)$ (-7.4%), $Apple(AAPL)$ (+5.3%), $Meta Platforms, Inc.(META)$ (+6.4%), $Salesforce.com(CRM)$ (+2.3%), and $Wal-Mart(WMT)$ (+3.6%).
1. Things You Should Know Before Starting Your Week
1) DeepSeek Shook the AI Sector, but AI Software Companies Emerge as Winners
US tech stocks, particularly hardware and chip design companies like Nvidia, Broadcom, Marvell, TSMC, and Texas Instruments, are still recovering from the steep selloff triggered by DeepSeek.
However, the $Invesco S&P 500 Equal Weight ETF(RSP)$ has risen 3.43% year-to-date, suggesting that this year's market rally has shown greater breadth rather than focusing solely on tech stocks.
Despite the sharp tech selloff caused by DeepSeek, the Bloomberg Magnificent 7 Total Return Index has still returned 2.48% year-to-date (or -0.83% week-to-date), indicating that investors have not lost interest in Magnificent 7 stocks.
The success of DeepSeek is likely to benefit AI software stocks, as they can now take advantage of lower AI computing costs. Beneficiaries include the $iShares Expanded Tech-Software Sector ETF(IGV)$ , $Snowflake(SNOW)$ , $Salesforce.com(CRM)$ , $Palantir Technologies Inc.(PLTR)$ and $CrowdStrike Holdings, Inc.(CRWD)$.
2) Trump’s Tariffs Are Finally Here—And Equity Markets Don’t Like It
Trump has imposed tariffs on imports from Mexico, Canada, and China.
Canada: A 25% tariff on all imports, except for energy products, which face a 10% tariff.
Mexico: A 25% tariff on all imports.
China: An additional 10% tariff on all imports.
Retaliatory Tariffs:
Canada: A 25% retaliatory tariff on $155 billion worth of U.S. goods.
o A $30 billion portion of these tariffs takes effect on Feb. 4.
o The remaining $125 billion will be implemented in 21 days.
Mexico: The Mexican government will announce tariff details on Monday.
3) The U.S. May Further Clamp Down on AI Chip Exports to Curb China’s AI Capabilities
Some U.S. lawmakers are urging for tighter export controls on $NVIDIA(NVDA)$ ’s AI chips.
Nvidia currently holds a 5.9% weighting in the $SPDR S&P 500 ETF Trust(SPY)$ , 7.7% in the $Invesco QQQ(QQQ)$ , and 7.1% in the Philadelphia Semiconductor $iShares Semiconductor ETF(SOXX)$ .
Continued weakness in Nvidia’s stock could drag down these broad market indexes.
2. Key economic events this week:
Monday: ISM Manufacturing PMI
Tuesday: JOLTS Job Openings
Wednesday: ADP Non-Farm Employment, ISM Services PMI
Thursday: Unemployment Claims
Friday: Non-Farm Payrolls, Unemployment Rate
3. Major earnings reports this week:
Monday: $Palantir Technologies Inc.(PLTR)$
Tuesday: $PayPal(PYPL)$ , $Pepsi(PEP)$ , $Pfizer(PFE)$ , $Spotify Technology S.A.(SPOT)$ , $Alphabet(GOOG)$ , $Advanced Micro Devices(AMD)$ , $Enphase Energy(ENPH)$
Wednesday: $Walt Disney(DIS)$ , $Uber(UBER)$ , $Novo-Nordisk A/S(NVO)$ , $ARM Holdings(ARM)$ , $Qualcomm(QCOM)$ , $Forward(FORD)$ , $Skyworks Solutions(SWKS)$ D
Thursday: $Eli Lilly(LLY)$ , $Roblox Corporation(RBLX)$ , $Amazon.com(AMZN)$
4.Conclusion
U.S. indexes are poised to open lower on Monday, primarily due to Trump’s tariffs and retaliatory tariffs.
However, Trump’s tariffs may serve as a negotiation tool to address issues such as border security and the fentanyl crisis. If progress is made on these fronts, we could see a policy reversal on the tariffs.
U.S. stocks look vulnerable this week, as global investors may rotate funds into other markets with cheaper valuations. However, any such rotation is likely to be short-lived, as the broader secular trend remains AI, with U.S. AI stocks as the primary beneficiaries.
I remain constructive on the U.S. equity market in 2025. The preferred strategy this week is to accumulate broad-based index ETFs on weakness, including:
S&P 500 ETFs: $SPDR S&P 500 ETF Trust(SPY)$ , $Vanguard S&P 500 ETF(VOO)$ , $iShares Core S&P 500 ETF(IVV)$
Nasdaq-100 ETF: $Invesco QQQ(QQQ)$
Semiconductor ETFs: $VanEck Semiconductor ETF(SMH)$ , $iShares Semiconductor ETF(SOXX)$
Magnificent Seven ETF: $The Magnificent Seven ETF(MAGS)$
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