Dow recovered 136, decliners over advancers 5-4 & NAZ bounced back 391. The MLP index gained 4+ to the 319s & the REIT index fell 4+ to the 403s. Junk bond funds were off a tad & Treasuries saw modest selling which lifted yields a little. Oil rose higher in the 79s & gold snapped back 34 to 2772 ( more on both below).
Dow Jones Industrials
General Motors (GM) stock fell even as the company beat top- & bottom-line expectations for the 4th qtr, while forecasting continued strong results for 2025. Concerns on the company’s quarterly earnings call focused on the automaker's preparation for changes under the Trump administration, including the impacts of potential tariffs on vehicle production & policy changes on electric vehicle sales & pricing, signaling an overhang on the auto industry. Analysts have said there's a lack of enthusiasm by investors for the US automotive industry amid a slowdown in electric vehicles & autonomous vehicles, as well as regulatory volatility. The automaker believes it can have another solid year despite industry sales slowing, a restructuring of its operations in China, & increased geopolitical & regulatory uncertainty in the US as Pres Trump begins his 2nd term. GM's 2025 guidance includes net income attributable to stockholders of $11.2 - $12.5B, or $11 - $12 in EPS; adjusted earnings before interest & taxes (EBIT) of $13.7 - $15.7B, or $11 - $12 adjusted EPS; & adjusted automotive free cash flow of $11 - $13B. “In our view, the guidance for 2025 leaves no room for errors, and also does not include impact from regulatory changes in the U.S., especially on tariffs and BEV support,” analysts at Bernstein said. GM's 2025 financial guidance met or exceeded many forecasts from analysts. Most notably, analysts were expecting adjusted earnings of around $14B. That compares with the automaker's 2024 results of adjusted EBIT of $14.9B, or $10.60 adjusted EPS, & net income attributable to stockholders of $6B, or $6.37 EPS. The adjusted figures & the $14B in adjusted auto free cash flow were records for the automaker, GM said. CFO Paul Jacobson said the company's 2025 guidance does not take into account any potential regulatory changes such as tariffs on vehicle imports or tax reform. GM's $47.7B in revenue in the 4th qtr was up 11% from the same period last year. Jacobson said the company’s 2024 performance was “outstanding,” citing growth in its EV & traditional internal combustion engine businesses. GM lost $1.64 per share, in the 4th qtr, which ended Dec 31, compared with EPS of $1.59 in the same period a year earlier. Quarterly results include $5B in special charges such as $4B in noncash restructuring charges related to its operations in China & $500M in charges related to the decision to stop funding its Cruise robotaxi business. Excluding those charges & other items, EPS was $1.92 in the 4th qtr. The stock dropped 4.90 (9%).
GM stock falls even as company beats analyst expectations on earnings
Amid the uncertainty of fiscal policy and the persistence of inflation, respondents to the CNBC Fed Survey dialed back their expectations for interest rate cuts but still believe the central bank will ease this year. Among the 25 respondents, 65% see 2 rate cuts in 2025, equal to the number penciled in by Federal Reserve officials in their recent forecasts & roughly equal to futures markets expectations. But that's down from 78% in the prior survey, while 61% forecast at least 1 cut in 2026, down from 70% in Dec. The fed funds rate is seen ending the year at 3.96%, 12 basis points higher than in the Dec survey, & 3.6% in 2026, up 16 basis points. A basis point equals 0.01%. The terminal rate, or the long-run nominal rate, edged up again, now standing at 3.4%, one-tenth of a percentage point higher than Dec & three-tenths higher than Mar 2024. The reduced outlook for rate cuts comes amid a decline in the probability of recession, an increase in inflation forecasts, & a mix of views on the inflationary & growth effects of the new administration’s anticipated policies. Pres Trump's signature economic policies. 2 of his campaign promises, tariffs & immigration, are seen boosting inflation & reducing growth. 2 other policies, deregulation & tax cuts, are viewed as positive for growth & either neutral or positive for reducing inflation. Asked to assess the total effects of Trump policies expected to be enacted, 64% say they will be somewhat or very inflationary, 23% believe they will have no effect on inflation either way & 14% say they will be somewhat deflationary.
Nvidia (NVDA) stock rose as the AI chipmaker began to recover from a massive decline the prior day that shaved nearly $600B off its market cap. The 17% freefall was prompted by investor anxieties related to a
new, cost-effective artificial intelligence model from the Chinese
startup DeepSeek. Some analysts worried that the cheaper
costs DeepSeek claimed to have spent training its latest AI models, due
in part to using fewer AI chips, meant US firms were overspending on artificial intelligence infrastructure. That created a concern among the investment community that its
high GPU (graphics processing unit, or AI chip) prices could come under
pressure & that demand for semiconductors could wane. NVDA's $589B market cap decline was the largest single-day loss in stock market history. The DeepSeek announcements drove down not only NVDA but the market at large, with the tech-heavy NAZ dropping 3%. Chip stocks dropped across the board yesterday, but some
names began to recover today. NVDA itself didn't express much anxiety over the DeepSeek buzz, calling R1 "an excellent AI advancement." The stock rebounded 10.31 (9%).
Nvidia surges to begin recovery after near-$600B rout
Gold prices are facing pressure for the 2nd straight day, trading around $2735, following a more than 1% drop the previous day after Chinese AI startup DeepSeek rocked the market. The results were not small, with over $550B in market capitalization wiped out for NVDA alone. Given the sensitivity of technology, cryptocurrencies such as Bitcoin also suffered, with Bitcoin (BTC) losing over 6.5% at 1 point among the victims of spillover in the financial market asset class. This has benefited Pres Trump, who has again called for global tariffs. His belief is that doing so would better protect US tech companies & shield them from China's dumping strategy. The rule of thumb remains that tariffs are inflationary, which means higher yields, which is a headwind for Bullion.
Gold Prices Flat After Nvidia Rout Extends On Monday
Oil prices rebounded from multi-week lows as disruption to Libyan oil loading operations offset fears of weaker demand linked to soft economic data from China & rising temperatures elsewhere. Brent crude oil futures were up 91¢ (1.2%) at $77.99 per barrel & US West Texas Intermediate crude futures were up 95¢ (1.3%) at $74.12. Brent settled yesterday at its lowest since Jan 9, while WTI hit its lowest since Jan 2. In Libya, local protesters prevented crude oil loading at Es Sider & Ras Lanuf ports, 5 engineers & a shipping source said, putting about 450K barrels per day of exports at risk. If such disorder spreads, which is not unusual when Libya's oil industry is held to ransom by 1 group or another, the current National Oil Corp evaluated production of 1.4 mbpd will come under threat. On the other hand, China, the world's largest crude oil importer, reported yesterday an unexpected contraction in Jan manufacturing activity, adding to concerns over global crude demand growth.
Oil prices bounce back from multi-week lows on Libya supply disruption
NAZ & S&P 500 rebounded, following a steep stock sell-off spurred by concerns of over-confidence in Big Tech's potential payoff from AI investments. Bellwether NVDA was the standout of the trading day, with shares climbing after it shaved off a record $589B from its market cap in the previous session. Stocks began to chip away at losses booked in today's tech-led rout. The risk to US leadership in AI raised questions about whether chipmakers & other tech names can follow thru on high earnings expectations.
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