Markets Struggle Amid Concerns Over Earnings and Trade Relations
The S&P 500 Index ($SPX) (SPY) has dipped by -0.20% today, while the Dow Jones Industrials Index ($DOWI) (DIA) has shown a slight increase of +0.04%. The Nasdaq 100 Index ($IUXX) (QQQ) is down -0.38%. March E-mini S&P futures (ESH25) are down -0.21%, and March E-mini Nasdaq futures (NQH25) have declined by -0.36%.
Weak Earnings Weigh on Major Stock Indexes
Market pressure is largely due to declines in major technology stocks following disappointing earnings reports. Alphabet has fallen more than -8% after reporting Q4 revenue that was below expectations, largely because of slowed growth in its cloud services. Similarly, Advanced Micro Devices is down over -10% after its Q4 data center revenue also fell short of estimates.
Trade Tensions Impact Market Sentiment
Fears surrounding U.S.-China trade relations are further contributing to stock declines, with shares of Apple dropping more than -1% after news of a potential investigation by China’s antitrust agency regarding its developer fees. The recent U.S. imposition of a 10% tariff on Chinese goods has been met with retaliation from China, which announced tariffs on U.S. coal, natural gas, oil, and agricultural equipment.
Bond Market Shows Mixed Signals
Despite earlier declines, stock indexes have recovered somewhat as the 10-year Treasury note yield fell to a 7-week low, easing supply concerns. The Treasury announced a consistent sale of $125 billion in T-notes and T-bonds for its February quarterly refunding, signaling stability in borrowing needs.
Labor Market Data Provides a Silver Lining
Positive news from the labor market has emerged, with the December ADP employment change increasing by +183,000, exceeding forecasts of +150,000. Additionally, November’s figures were revised upward significantly.
Trade Deficits and Service Sector Lag
On a less favorable note, the U.S. trade deficit widened to -$98.4 billion in December, the largest in nearly three years, exceeding expectations and negatively impacting Q4 GDP. Furthermore, the January ISM services index fell -1.2 points to 52.8, below the forecast of 54.0.
Fed Policymakers Seek Clarity Amid Uncertainty
In comments reflecting the current economic climate, Richmond Fed President Barkin indicated that policymakers require more time to gauge the economy’s direction and inflation—particularly in light of unpredictable policies from President Trump. He expressed a desire to maintain steady interest rates.
Upcoming Earnings Releases
As the earnings season advances, companies continue to reveal their Q4 performance. Qualcomm is scheduled to release its earnings results after today’s market closure, while Amazon.com will follow on Thursday. Analysts estimate that S&P 500 earnings increased by +7.5% year-over-year in Q4, marking a strong pre-season forecast.
Rate Cut Expectations
The market currently assigns an 18% probability of a -25 basis points rate cut in the forthcoming Federal Open Market Committee meetings on March 18-19.
International Markets Mixed
International markets reflected a mixed bag today. The Euro Stoxx 50 index declined by -0.26%, China’s Shanghai Composite Index closed down -0.65%, while Japan’s Nikkei Stock 225 saw a slight increase of +0.09%.
Interest Rate Movements
March 10-year T-notes (ZNH25) increased by +17 ticks, with the yield down -8.6 basis points, settling at 4.424%. T-notes reached a 7-week high today, bolstered by positive influences from European government bond strength and reduced Treasury auction worries.
Factors Influencing T-Notes
However, the stronger-than-expected December ADP employment report presents a hawkish signal for Federal Reserve policy. Moreover, Richmond Fed President Barkin’s comments suggest a preference for maintaining current monetary policy.
European Bond Yields Decline
Yields on European government bonds fell today, with the 10-year German bund yield dropping to 2.344% and the UK gilt yield falling to 4.422%. These movements may reflect broader economic sentiments across the region.
U.S. Stock Market Leaders and Laggards
Alphabet (GOOGL) has fallen over -8%, reporting Q4 revenues of $81.62 billion, below the expected $82.82 billion. Meanwhile, Advanced Micro Devices (AMD) is down by more than -10%, leading losses in the Nasdaq 100 after reporting Q4 data center revenue of $3.86 billion, below the $4.09 billion consensus.
Apple (AAPL) has decreased by more than -1% in light of the Chinese regulatory investigation, while FMC Corp (FMC) has plummeted -33% after projecting adjusted EPS of $3.26-$3.70 for 2025, trailing the consensus of $4.40.
Uber Technologies (UBER) has seen an -8% drop after reporting adjusted Ebitda of $1.84 billion, missing the $1.85 billion consensus. Match Group (MTCH) is down over -7%, forecasting full-year revenue below expectations.
On the brighter side, Mattel (MAT) rose by over +12% following stronger-than-expected Q4 net sales and an optimistic full-year adjusted EPS forecast, while Johnson Controls International Plc (JCI) climbed more than +11% on an upward adjustment to its earnings forecast.
Other notable gainers include Old Dominion Freight Line (ODFL), which rose over +6% after reporting higher-than-expected Q4 EPS, and Amgen (AMGN), which is up more than +5% following strong earnings results.
Upcoming Earnings Reports
Investors should note the list of companies reporting earnings on February 5, 2025, including major players like Aflac Inc (AFL), Align Technology Inc (ALGN), Allstate Corp/The (ALL), and Walt Disney Co/The (DIS).
On the date of publication,
Rich Asplund
did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy
here.
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