(Justin Vaughn, Editor, Options Trading Report)
Even though bad news seemed to overtake good news, the exchanges finished the month with gains. Stocks were positive for the first half, then slowly backed off with bad news piling up. Fears of President Trump’s institution of massive tariffs, the release of China’s DeepSeek chip innovation have rattled the market. As President Trump has backtracted on tariffs aimed at Mexico and Canada, he is moving forward on Chinese tariffs. DeepSeek’s release, a direct competitor of Nvidia, threatens the very company that competes head-on with China. Many Artificial Intelligence and government officials have serious concerns that the developmental information came from spying on Nvidia. China claims the end product is less costly, has a longer life, uses less electricity, with ease of manufacture… and willing to share the technology worldwide. The market has suffered significantly since the DeepSeek announcement, with severe devaluations in the tech and chip stocks. The ‘Blue Chip’ Dow Jones Industrial Average was up 4.7%, followed by the S&P 500 up 2.7%. The Nasdaq Composite added 1.6% upside, constrained by heavy-tech make-up. As previously noted gold was also up 7% for the month leasing all commodities. “Money is rotating within the stock market,” said John Angustine, chief investment officer at Huntington. This is an unusual start to the year because usually the word rotation comes into the investing world and something goes down.” Up to date more 75% of reporting companies “have beaten Wall Street forecasters,” according to FactSet.
Monday’s market was a ‘hodge-podge’ as President Trump back-pedeled again on the institution of tariffs on Mexico and Canada. All three indexes were affected with nearly all sectors off. “My sense is tariffs are coming, but I don’t think they’ll be quite on the same scale that the president has talked about,” said Neil Shearling, chief economist at Capital Economics Group. Adding “for obvious reasons, and that is that it would tank the market.” Tanked, is exactly what happened Monday, as confused investors fumbled the market lower.
Stocks rebounded Tuesday after a ‘tariff’ influenced’ Monday’s session. New positive ‘Jobs Numbers’ with less available jobs openings steered the market positive. President Trump’s lingering decision on Chinese tariffs gave all indexes a needed boost. The Nasdaq led the way, jumping 1.4%, while the S&P 500 was up 0.7%. The Blue Chip Dow Jones ended near the flatline. The U.S. dollar lost 1% versus leading world currencies, strongly affected by the worldwide tariff situation. The Chinese economy, in its weakest state in decades, has become increasingly more dependent on the U.S. for goods and services and is in an awkward position. Still the Chinese are demonstrating a strong retaliatory stance, maintaining “Strength, while avoiding unnecessary escalation to keep its options open,” said Han Shen Lin, China Director of the Asian Group. The CBE Volatility Index fell to 17 on Tuesday, near the average level the past year. The 10-year Treasury note fell to 4.511% down from 4.542% on Monday. Oil weakened, falling to the $72.70 a barrel range, with pump prices ranging from $2.99 to $3.29 a gallon. Bitcoin tickled $100,000 but edged below to the $97,000 area. All three indexes managed a slight gain on Thursday. Tariff concerns all week have harnessed the market as President Trump’s litany of comments on threats of tariffs, international crisis have handcuffed investors……maybe next week will be less of the…same.
RUMBLINGS ON THE STREET
Jake Behan, head of Capital Markets of Direxion, WSJ – “Entering peak earnings season, the burden falls on AI leaders to justify their lofty valuations and, especially with new entrants like DeepSeek shaking up the landscapes”
Leon Cooperman, Billionaire stockbroker, founder of Omega Family Office, WSJ – “Every third word out of anyone’s mouth was AI,” Cooperman said. “Everybody was bulled up in the market. If you have a contrarian bone in your body you have to look the other way.”
JamesReilly, senior markets economist at Capital Economics, Barron’s – “It is U.S. trade policy that has again stolen the headlines. It is unclear what tariffs, if any, will be announced this weekend; but what seems clearer is that it will not stop here.”
Sam Stovall, Chief Investment strategist at CFRA Research, WSJ – “With the inflation data coming out a little better than expected, investors breathed a sigh of relief, short sellers had to cover, and today I think there’s probably a little bit of profit taking.”