The Week That Was, The Week Ahead: Macro & Markets, January 26, 2025

Everything to Know about Macro and Markets

Stocks clocked in their second consecutive weekly gain and the best start to a presidential term since Ronald Reagan was sworn in to office in 1985. The S&P 500 (SPX) was up by 1.74% for the holiday-shortened week, while the Dow Jones Industrial Average (DJIA) jumped by 2.15%. Meanwhile, the tech benchmarks Nasdaq Composite (NDAQ) and Nasdaq-100 (NDX) rose by 1.65% and 1.55%, respectively.

Trump’s Market Honeymoon

Although the DJIA led the gains this week, it was the S&P 500 that reached a new all-time high on Thursday. Despite Friday’s dip, achieving the first record of the year is expected to bolster investor sentiment moving forward.

President Trump appears to be enjoying a honeymoon with the stock markets, as investors react positively to his statements and actions. On his first day in office, Trump signed a record 26 executive orders, addressing areas such as energy, immigration reform, and technology. Many of these were more moderate than anticipated, which was welcomed by the markets.

Trump’s remarks on decreasing energy costs and urging OPEC to reduce oil prices weighed on energy stocks but boosted overall market sentiment. However, a key driver of optimism was the President’s pro-tech agenda. This was reflected in an executive order directing agencies to craft policies ensuring U.S. dominance in AI, as well as the announcement of a new AI infrastructure initiative.

The initiative, named “Stargate,” proposes up to $500 billion in private-sector investment to build AI data centers and infrastructure through a joint venture involving OpenAI, SoftBank, MGX, and Oracle. Beyond fostering U.S. leadership and innovation, Stargate is expected to create approximately 100,000 jobs. Additionally, the plan ties into broader expectations of addressing energy infrastructure challenges, crucial for electricity-intensive projects like AI development.

Unexpected Tariff Moderation

The Administration’s next steps are expected to focus on Trump’s pro-growth agenda, including deregulation – particularly in the financial sector – and tax cuts. While these measures require Congressional approval and will take time, progress could enhance market sentiment, spur capital-market activity, and eventually strengthen corporate bottom lines.

Trade policy remains another critical focus. Contrary to initial fears of immediate, trade-stifling tariffs, Trump instead called for a federal review of trade policies to evaluate prospective tariffs and their impact on economy. His statement about preferring not to use tariffs on China fueled optimism for a potential trade deal. While he threatened 25% tariffs on Mexico and Canada, the unexpected moderation in approach to trade eased investor anxiety. Analysts now predict tariff levels that are unlikely to significantly hinder economic growth.

Trump also pledged to demand Federal Reserve rate cuts following potential declines in oil prices. While markets received this favorably, the likelihood of success remains uncertain. Economic reports paint a picture of overall health, tempered by pockets of weakness, including housing, services PMI deceleration, and recent signs of infirmity in the labor market. Consumer sentiment dropped for the first time in six months as inflation expectations surged to their highest levels since May. The Federal Reserve has signaled hesitancy about further rate cuts, and renewed easing may depend on favorable inflation trends and clarity on government spending.

Earnings in Spotlight

Amid uncertainty around the outlook for inflation and interest rates, one positive catalyst for stock markets has remained intact so far: corporate earnings. Though only 16% of the S&P 500 companies have reported their quarterly results thus far, the earnings season is off to a strong start with the highest year-over-year earnings growth rate in three years. Over 80% of actual EPS results have exceeded estimates, with the Financial sector leading in terms of positive surprises. 

The upcoming week will focus on the Tech sector’s earnings, spotlighting megacaps such as Microsoft, Meta, Tesla, and Apple. This “Magnificent” cohort has driven much of the S&P 500’s gains over the past two years, with investor expectations running high. While robust earnings are anticipated, any weakness in guidance could sink the market.

In contrast with the technology leaders’ earnings, expectations for the Federal Reserve’s upcoming policy meeting remain modest. Traders widely expect rates to remain unchanged, in line with December’s cautious stance and the supporting economic data. While this week’s PCE inflation report will not influence any imminent decisions, it is likely to shape policymakers’ future actions.

Stocks That Made the News

▣ Chipmakers dropped on Friday following a weaker-than-expected outlook from Texas Instruments (TXN), which led investors to reassess the sector’s prospects. Nvidia (NVDA) and other semiconductor companies were impacted, with additional pressure stemming from comments by SK Hynix, a key Nvidia supplier, warning that chip demand in 2025 might be “clouded.” Although much of the negativity centered on PC and phone-chip demand, the remarks heightened investor anxiety following a strong run-up fueled by Trump enthusiasm and amid trade realignments ahead of major earnings. Broadcom (AVGO) was the sole chip stock to rise on Friday, supported by its strong standing in the AI and data center markets, positioning it for a key role in the “Stargate” initiative.

▣ Despite a drop on Friday alongside other tech names, Oracle (ORCL) surged nearly 12% over the week. The company is set to play a pivotal role in the Stargate project, leveraging its cloud infrastructure expertise to support the initiative’s ambitious goals. As an initial equity funder and key technology partner, Oracle is collaborating with OpenAI and NVIDIA to build and operate advanced computing systems critical for AI development. In addition to Oracle and its initial partners, companies like Arista Networks (ANET), Micron Technology (MU), and Microsoft Corporation (MSFT) are poised to significantly contribute to the development and support of Stargate’s expansive AI infrastructure.

▣ A less obvious beneficiary of the Stargate news is Moderna (MRNA), which surged over 13% during the week. The pharma giant’s stock was already climbing after securing a substantial subsidy from the U.S. government and winning a tender to supply vaccines to 19 European countries to combat COVID-19. However, a stronger catalyst emerged from Oracle CEO Larry Ellison’s remarks, suggesting that AI could play a pivotal role in developing mRNA vaccines to target cancer. Moderna, which signed an agreement with OpenAI last year to leverage ChatGPT for accelerating drug development, is increasingly viewed by investors as one of the most AI-focused pharmaceutical companies.

▣ Netflix (NFLX) saw a surge of over 12.5% last week following the release of its fourth-quarter earnings report. The streaming giant reported an impressive 16% increase in subscribers, far surpassing analysts’ expectations. This growth brought Netflix’s total subscriber base to over 300 million. The company also reported better-than-expected top- and bottom-lines and raised Q1 2025 revenue and EPS guidance.

▣ GE Aerospace (GE) saw its stock climb nearly 6% on the week following the release of its fourth-quarter earnings report. The company reported a strong revenue and earnings beat, with adjusted EPS surging by over 103% year-over-year. Looking ahead, GE provided an optimistic 2025 outlook, expecting double-digit revenue and EPS growth with greater than 100% free cash flow conversion. The company also announced a 30% dividend increase and a $7 billion share buyback program, further bolstering investor confidence.

Upcoming Earnings and Dividend Announcements

The Q4 2024 earnings season is in full swing, with many notable earnings releases scheduled for this week.

The highlights of the week will be the reports from Microsoft (MSFT), Meta Platforms (META), and Tesla (TSLA) on Wednesday, and from Apple (AAPL) on Thursday. Also in focus are chipmakers and other technology large caps, with reports coming from ASML Holding (ASML), SoFi Technologies (SOFI), SAP AG (SAP), ServiceNow (NOW), IBM (IBM), Qualcomm (QCOM), Lam Research (LRCX), KLA (KLAC), Intel (INTC), Check Point (CHKP), and KLA (KLAC). Other notable quarterly results will be released by AT&T (T), Stryker (SYK), Boeing (BA), Starbucks (SBUX), Visa (V), Mastercard (MA), Caterpillar (CAT), Exxon Mobil (XOM), and AbbVie (ABBV).

Ex-dividend dates are coming this week for Conagra Brands (CAG), Bank of New York Mellon (BK), Clorox (CLX), Lennar (LEN), Valero Energy (VLO), Enterprise Products Partners (EPD), Morgan Stanley (MS), Texas Instruments (TXN), and other dividend-paying firms.

For additional exclusive market insights and content from TipRanks Macro & Markets research analyst Yulia Vaiman, click here.