Big red day in the markets 28/01/2025

HOT stories for today

 

Why DeepSeek news is a threat
 

• On Monday, President Donald Trump called the rise of the Chinese AI app DeepSeek "a wake-up call" for U.S. tech companies. DeepSeek, a low-cost AI assistant, has topped Apple’s app store, raising concerns about intensifying competition from China in the AI sector. Trump expressed confidence in America’s AI dominance but acknowledged the challenge posed by DeepSeek, which rivals Meta and OpenAI models despite its lower development costs. Speaking in Florida, he said the app’s success highlights the need for U.S. industries to sharpen their competitive edge while praising its cost-efficient approach as a “positive development” for the field.
• DeepSeek follows other Chinese apps, like RedNote and Lemon8, that gained traction during TikTok’s brief ban. Rep. John Moolenaar, R-Mich., called DeepSeek “a tool of the Chinese Communist Party” and pushed for stricter export controls on U.S. technologies tied to its development. Sen. Mark Warner, D-Va., defended current chip export controls but argued they cannot fully halt China’s AI progress. House Speaker Mike Johnson, R-La., labeled DeepSeek “a serious threat” and accused China of exploiting trade systems and intellectual property to gain an AI advantage.

 
 
 
Stocks on the move:       

• Nvidia (NVDA) — The semiconductor giant plunged nearly 17% as questions arose over the massive investments in artificial intelligence following the performance of a language model from Chinese startup DeepSeek. This decline marks Nvidia’s worst day since March 2020.
• Power stocks — Companies involved in developing AI data centers also faced steep losses. Constellation Energy (CEG) and Vistra (VST) dropped over 20% and 28%, respectively, while GE Vernova and Talen Energy both fell more than 21%.
• Crypto stocks — Shares linked to bitcoin’s price took a hit amid the broader tech selloff. Coinbase (COIN) and MicroStrategy (MSTR) slid more than 6% and 1%, respectively. Bitcoin mining companies supporting AI ventures suffered sharper losses, with Core Scientific (CORZ) down 29%, TeraWulf (WULF) falling 29%, and Iren (formerly Iris Energy) declining over 24%.
• SoFi Technologies (SOFI) — Shares fell 10.3% after the financial services company issued a disappointing first-quarter outlook, overshadowing better-than-expected earnings and revenue.
• Ralph Lauren (RL) — The stock declined 3.2% after Raymond James downgraded it to market perform from outperform. The firm cited limited upside following Ralph Lauren’s recent rally and the impact of a strengthening U.S. dollar on its financials.

 
 
 
Today’s action

• Hong Kong stocks edged higher on Tuesday as Wall Street grappled with a sharp sell-off in tech shares. Several Asia-Pacific markets remained closed for the Lunar New Year holiday. Hong Kong’s Hang Seng Index rose 0.14%, while Japan’s Nikkei 225 fell 1.34%, and the Topix erased losses to trade flat.
• U.S. S&P 500 futures were relatively steady, hovering just below the flatline. Nasdaq 100 futures gained 0.13%, while Dow Jones Industrial Average futures slipped 107 points, or 0.24%. The market downturn was driven by concerns over Chinese startup DeepSeek and its potential impact on the artificial intelligence sector. Investors are now shifting focus to upcoming corporate earnings, with reports from Starbucks (SBUX) and Boeing (BA) expected Tuesday. Key “Magnificent Seven” tech giants, including Meta Platforms (META), Microsoft (MSFT), Tesla (TSLA), and Apple (AAPL), will release results later this week. Meanwhile, the Federal Reserve begins its two-day policy meeting on Tuesday. Fed funds futures indicate a 97% likelihood that interest rates will remain unchanged, according to CME Group’s FedWatch Tool. Investors are also eyeing inflation data due Friday for insights into the health of the U.S. economy.

Wahtclist: SBUX, COIN, NVDA, RCL, GM, BA, RTX, LMT, COIN, META

Bitcoin

• Bitcoin's valuation dropped to an intraday low of $97,750 during the pre-dawn trading hours on Monday but managed to recover slightly, holding above the psychologically significant $100,000 mark as of 8 a.m. Eastern Time. By 8:15 a.m., bitcoin was trading at $101,240 per unit. The leading cryptocurrency by market capitalization experienced a 4.1% drop in value at the time of writing. Notably, bitcoin reached its lowest point of $97,750 at around 2:30 a.m. Eastern Time before reclaiming ground above the $100,000 threshold, where it now remains at just over $101,000.
• Meanwhile, several major altcoins experienced more severe declines. XRP saw a depreciation of more than 7%, while Solana (SOL) endured a sharper correction, dropping 9%.
  Watchlist: Bitcoin: 89 000-108 000, Ethereum: 3000-3800, Solana: 160-220

Forex

• The Japanese Yen (JPY) extended its decline on Tuesday, retreating further from the multi-week high it reached against the U.S. Dollar (USD) on Monday. During the Asian session, the JPY reversed much of the previous day’s gains as several factors supported the USD. U.S. President Donald Trump’s trade tariff threats reignited inflation concerns, leading to a fresh rise in U.S. Treasury bond yields. This, in turn, bolstered the USD and reduced demand for the lower-yielding Yen.
• However, divergent monetary policy expectations between the Bank of Japan (BoJ) and the Federal Reserve may limit further upside for the USD/JPY pair in the near term. Meanwhile, EUR/USD extended its pullback from the 1.0530 zone—its highest level since December 17—falling over 0.50% to trade around 1.0430. The USD’s resurgence, driven by rebounding bond yields and trade-related inflation concerns, coupled with expectations of aggressive ECB monetary easing, has left the euro vulnerable to further losses.
  Watchlist: EUR/USD: 1.0200-1.0550, USD/JPY: 155-158.50

Basic Materials

• Gold prices struggled to maintain momentum after an overnight rebound from a multi-day low, as rising U.S. Treasury bond yields boosted demand for the U.S. Dollar (USD), pressuring the XAU/USD pair. Ahead of the European session on Tuesday, gold remained in a consolidation phase near $2,740. U.S. President Donald Trump’s trade tariff threats reignited inflation concerns and fueled a recovery in Treasury yields, strengthening the USD, which had recently hit a one-month low. While the stronger USD weighs on gold, expectations of Federal Reserve rate cuts and inflation fears may offer some support.
• West Texas Intermediate (WTI), the U.S. crude oil benchmark, edged lower to around $73.00 during early Asian trading on Tuesday. WTI remains under pressure amid lingering concerns over U.S. President Donald Trump’s tariff threats and weak economic data from China, which weigh on energy demand prospects. Trump recently unsettled markets by imposing tariffs on Colombia before pausing the action after securing concessions. He has also issued warnings of potential tariffs on China, Canada, Mexico, and the European Union. Additionally, Trump vowed to press Saudi Arabia and OPEC to lower oil prices, further fueling uncertainty around energy policies. These developments have left the WTI price vulnerable to downside risks, while investors await the Federal Reserve’s rate decision later on Wednesday for further direction.
  Watchlist: GOLD 2600-2750, US Oil: 70.00-79.00

Key Economic Events Today:

EST time

08:30 am: USD Core Durable Goods Orders
10:00 am: USD Consumer Confidence 
10:00 am: USD Richmond Manufacturing Index
07:30 am: AUD CPI

Earnings:

BMO (Before the US Market opens)

SAP       SAP SE  
RTX       RTX Corporation
BA         Boeing Company
LMT       Lockheed Martin Corp.
RCL       Royal Caribbean Cruiuses
GM         General Motors Company

AMC (After the US Market closes): SYK, SBUX, CB

The TEFS Analyst team wishes you a successful day!