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24.01.2025 12:26 PM
The S&P 500 set a new closing record on Thursday. The breakout came as investors scrutinized earnings results and pondered former President Donald Trump's recent comments. His comments on lower interest rates and lower oil prices have piqued market interest.
Speaking at the World Economic Forum in Davos, Switzerland, Trump called on OPEC to reduce oil prices and urged central banks to cut interest rates. Moreover, he warned the global business community about the possibility of tariffs on products made outside the United States. These statements have become a new talking point among investors and analysts.
"Investors like the idea of lower rates and lower oil prices," said Lindsay Bell, chief strategist at 248 Ventures. According to her, the market reaction shows cautious optimism. Despite this, market participants are wary of the possibility of higher inflation due to tariff threats. These factors could slow further rate cuts by the Federal Reserve.
The Fed is expected to keep rates unchanged next week, the first meeting of the regulator in the new year. Meanwhile, investors continue to closely monitor economic signals, trying to predict how Trump's statements and the Federal Reserve's policies will interact.
This tense mix of factors, on the one hand, fuels the market's growth, and on the other, maintains a certain caution in the actions of players. The mood for optimism is still dominant, but the threat of tariffs and their possible consequences remain a significant risk.
Peter Tooze, president of Chase Investment Counsel in Virginia, is confident that the Federal Reserve will base its decisions on objective economic data, and not on political statements. According to him, even Trump's insistent demands are unlikely to influence the regulator's decisions.
"The president's comments on rates are unlikely to have a significant impact on the Fed," Tooze emphasized. "Decisions will be made solely based on an analysis of current economic data."
Thursday was a landmark day on Wall Street: all three key indexes showed growth for the fourth day in a row. Market participants noted that both corporate earnings reports and potential policy changes were weighing on investor sentiment.
The S&P 500 (.SPX) rose 32.34 points, or 0.53%, to 6,118.71. It was the index's first record close since December 6, when it was on the verge of hitting a new high the day before.
The Dow Jones Industrial Average (.DJI) was even more impressive, adding 408.34 points, or 0.92%, to end the day at 44,565.07. The Nasdaq Composite (.IXIC) rose 44.34 points, or 0.22%, to 20,053.68.
All 11 sectors of the S&P 500 ended the trading day with positive dynamics. Healthcare stocks (.SPXHC) were particularly strong, jumping 1.35%, while industrials (.SPLRCI) added 0.96%.
The banking sector (.SPXBK) also showed strong gains. The index closed the day up 0.73%, hitting a record high during trading.
The current trends suggest that the market is confident of its upward movement. However, questions remain about the possible impact of tariffs and how they might affect inflation and the Fed's decisions. Investors remain cautious, although optimism continues to fuel stock index gains.
The utilities sector (.SPLRCU), despite slowing to 0.47%, remains in the spotlight. Energy companies showed particular momentum. Donald Trump's statement at the World Economic Forum about the need to double energy capacity to support the rapid development of artificial intelligence has become an impetus for the growth of shares of a number of companies.
Constellation Energy (CEG.O) posted an impressive 4.1% gain, followed by AES Corp (AES.N), which rose 3.6%. Vistra Corp (VST.N) rounded out the top three with a 2.7% gain. The impact of artificial intelligence on energy infrastructure is becoming clear, and the market is reacting to these prospects.
The tech sector (.SPLRCT), which rose 2.5% yesterday after Trump announced a $500 billion private investment in AI infrastructure, showed more modest results on Thursday. It rose just 0.12%. Despite this, the sector remains in the focus of long-term investors.
The Labor Department reported that jobless claims totaled 223,000, slightly above the 220,000 forecast. The increase was a minor surprise for analysts, but did not have a major impact on overall market sentiment.
Among the companies that pleased investors, GE Aerospace (GE.N) stood out. Its shares soared 6.6% after publishing optimistic profit forecasts for 2025. Insurer Elevance (ELV.N) was also up 2.7%, thanks to a strong fourth-quarter result.
But not all reports were positive. Electronic Arts (EA.O) shares plunged 16.7% after the company cut its full-year bookings forecast. American Airlines (AAL.O) also disappointed investors, missing 2025 earnings estimates and sending shares down 8.7%.
Energy and artificial intelligence remain key growth areas, but volatility in specific sectors such as technology and airlines reminds investors to be mindful of risks. The market continues to teeter between optimism and caution, with unemployment data and corporate earnings adding further nuance to the picture.
European companies are showing signs of solid earnings growth for the third straight quarter, giving investors hope despite ongoing political and economic turmoil and threats of tariffs from the US.
January was a banner month for European markets, with the rate of investment inflows the second-fastest in 25 years, according to Bank of America. This happened even before the first corporate earnings reports and despite Donald Trump's tougher rhetoric towards the EU.
Despite the optimism, there is anxiety in the air. Trump's statements about the possible introduction of tariffs on EU imports are increasing tensions. Against this backdrop, Germany and France, the two key engines of the eurozone economy, are facing a slowdown in growth, while Italy remains in an industrial recession. These factors make it difficult to achieve a sustainable recovery.
This week, investors' attention is focused on a number of large European companies. On Tuesday, luxury goods market leader LVMH (.LVMH.PA) will report its results. On Wednesday, Dutch computer equipment maker ASML (ASML.AS) will report its financial results, and on Thursday, Deutsche Bank (DBKGn.DE) will report. Next week, attention will be focused on Danish pharmaceutical giant Novo Nordisk (NOVOb.CO).
There are already examples of successful reports. On January 16, shares of Swiss luxury goods maker Richemont (CFR.S) soared, posting their biggest daily gain in 16 years after fourth-quarter sales beat expectations.
The latest surveys of business activity show that the eurozone's largest economies – Germany, France and Italy – are in the grip of an industrial recession. This contrasts with the US, where strong economic growth continues to underpin global performance. This gap is hurting the competitiveness of European companies and their earnings.
Another driver for European stocks has been the weak euro, which has lost about 4.5% of its value over the past year. A cheaper euro makes exports more competitive, supporting demand for the region's products.
Despite a strong influx of investment and early encouraging results, European markets remain under pressure from external and internal factors. Whether the region's companies can live up to investors' high expectations will become clear in the coming weeks. Meanwhile, market participants continue to balance between caution and hope for continued growth.
According to analysts at Goldman Sachs, about 60% of European companies' revenue is generated outside the continent. This highlights the region's significant reliance on global markets and trading partners. This situation creates both opportunities and risks, especially given the threat of tariffs from the US.
European stocks are currently trading at the largest discount to the S&P 500 on record. According to LSEG Datastream, European companies are trading at a forward price-to-earnings (P/E) ratio of about 13.3, compared to 21.6 for US stocks. This highlights a significant difference in market valuations and potentially makes European assets more attractive to long-term investors.
Many of these discounts and global risks are already priced into investors' strategies. However, as analysts note, an important element in decision-making will be what forecasts companies will make for the current year. Sectors that demonstrate resilience to external shocks may come into focus.
On Monday, shares in the German chemical company Lanxess (LXSG.DE) rose by 5.1%. The impetus for this was the company's announcement that its fourth-quarter profit would exceed market expectations by more than 20%. The main reason for this result was pre-purchases by American customers worried about tariff threats from the Donald Trump administration.
The European market continues to grapple with challenges related to both domestic economic problems and global threats. Dependence on external revenue makes it particularly vulnerable, but at the same time provides unique opportunities for growth. The question is whether companies in the region will be able to take advantage of these opportunities and meet investor expectations while remaining competitive in the face of global turbulence.
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*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
