Stocks ended the turbulent week mixed. The Dow Jones Industrial Average (DJIA) rose by 0.27%, while the S&P 500 (SPX) was down by 1%. Meanwhile, the tech benchmarks Nasdaq Composite (NDAQ) and Nasdaq-100 (NDX) logged weekly losses of 1.64% and 1.36%, respectively. Despite the weekly slide, stocks are firmly in the green year-to-date, with the DJIA leading the gains.
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On Monday, tech stocks pulled the broad market down following the news that Chinese start-up DeepSeek released a competitive AI model. U.S. technology stocks were rattled by DeepSeek’s claims that its AI chatbot performed just as well as the leading AI applications at a fraction of the cost, utilizing much less data and power. Investor anxiousness about tech leaders’ elevated valuations resurfaced again, heated up by questions regarding the necessity of the enormous capex surge into AI chips, data centers, and electricity. However, after Monday’s freefall, dip-buyers rushed in to pick AI leaders at a discount as strategists questioned DeepSeek’s threat to U.S. AI leadership.
As stocks rebounded from Monday’s sell-off, reassured investors shrugged off December Core PCE, reading that inflation rose above November’s annualized pace, which was in line with expectations. The preliminary estimate of the Q4 GDP growth revealed that the economy remained firmly in growth mode. Although growth came in weaker than economists expected last quarter, the weakness was caused by the many disruptions, such as a strike at Boeing, two hurricanes, and LA wildfires. Besides, it capped a year in which the economy expanded by 2.8%, slightly below 2023’s pace.
The underlying economic strength—measured by consumer spending and private investment—remained healthy throughout the year. Analysts positively opined on the data, returning to the “Goldilocks” narrative. Given this background, the Federal Reserve’s decision to hold rates unchanged was largely a non-event for the stock markets, as it was a widely expected outcome.
Fed Chair Jerome Powell said that policymakers didn’t need “to be in a hurry” to cut rates. They believe a cautious approach is necessary in view of the stalled progress on the inflation front and uncertainty posed by economic policy. President Trump’s promise to cut corporate taxes and ease regulations could reduce inflation and speed up the economy, while the effects of high tariffs could have the opposite effect.
Three Economic Events
Here are three economic events that could affect your portfolio this week. For a full listing of additional economic events, check out the TipRanks Economic Calendar.
» January’s ISM Manufacturing PMI – Monday, 02/03 – This report shows business conditions in the U.S. manufacturing sector and is a significant indicator of overall economic conditions. PMIs are considered one of the most reliable leading indicators for assessing the state of the U.S. economy, helping analysts and economists anticipate changing economic trends.
» January’s ISM Services PMI – Wednesday, 02/05 – This report shows business conditions in the U.S. services sector, contributing over 70% of the U.S. GDP. PMI indices are leading economic indicators used by economists and analysts to gain timely insights into changing economic conditions, as the direction and rate of change in the PMIs usually precede changes in the overall economy.
» December’s Nonfarm Payrolls and Unemployment Rate – Friday, 02/07 – The Nonfarm Payrolls and Unemployment reports present the number of new jobs created during the previous month and the percentage of people actively seeking employment in the last month. These reports are two of the most important economic indicators as policymakers follow the shift in the number of positions since it is strongly associated with the economy’s overall health. One of the Federal Reserve’s mandates is full employment, and it considers labor market changes when determining its policy decisions.
For more exclusive market insights and content from TipRanks Macro & Markets research analyst Yulia Vaiman, click here.
