Key Takeaways
- Market Broadens As More Stocks Contribute To Recent Rally Gains
- Earnings Reports Highlight Strong Demand Across Multiple Industry Leaders
- AI Investment Boost Fuels Optimism For Growth In Tech Sector
Stocks kicked off the week and first day of trading under the Trump Administration with strong gains across the board. The S&P 500 was up 0.9% and is now just 1% off its all-time high. The Nasdaq Composite added 0.64%. The biggest gainers on the day were the Dow Jones Industrial Average and Russell 2000, which gained 1.2% and 2%, respectively.
There are some encouraging signs with respect to the rally we’ve seen since last week. Market breadth is getting better. Last Monday, just 15% of companies in the S&P 500 were trading above their 50-day moving average. As of yesterday’s close, that number is now 51%. What that means is, this most recent move higher is not simply coming from a concentrated number of stocks, but rather a broader group.
One concern I had much of last year was the market becoming reliant on just a handful of companies, such as those in the Magnificent Seven. However, one of the key members of that group has taken a bit of a beating lately. Shares of Apple hit an all-time high back on December 26th. Since then, shares are down 15%. Recent weakness can be attributed to business in China where iPhone sales fell 18% in the fourth quarter. Apple also lost the top spot for mobile phone sales, falling to third place behind Huawei and Xiaomi. Apple is scheduled to report earnings next week and that is a call I’ll be very interested in.
Speaking of earnings, after the close yesterday, Netflix reported their most recent earnings. It was a blowout quarter across the board. The streaming giant added 18.9 million new subscribers in the fourth quarter with much of that growth coming from its ad-supported tier. That was a 44% increase year-over-year. The company also announced it will raise prices on all of its plans by $1. Netflix raised 2025 revenue guidance slightly from a range of $43 – $44 billion to $43.5 – $44.5 billion. Shares of Netflix are trading higher in premarket by 15%.
There are some other earnings out this morning which I’ll quickly cover. Johnson and Johnson reported a beat on both the top and bottom lines, however, that stock is relatively unchanged in premarket activity. Shares of The Travelers Company are higher by 4% premarket. Strength in the company’s underwriting business led to a beat on both revenues and earnings. This is one to watch as the total cost from the California wildfires is still being totaled. Procter and Gamble reported earnings that also beat on both the top and bottom lines, driven by strong U.S. demand. Organic sales increased by 2% while prices across categories remained flat. United Airlines posted a beat on both earnings and revenues citing strong travel demand. The airline also raised guidance. Shares of United are trading higher by 4% in premarket. Lastly, Capital One is lower by 1% in premarket after the company beat on earnings but missed on revenues.
As we get deeper into earnings season, I think one thing we’re going to begin hearing more about is the strength of the U.S. dollar. Since October, the dollar has been rising and that is going to impact international sales. We may also hear about gas prices hurting margins. Oil prices briefly pierced $80 per barrel last week, though that was short-lived. Still, as prices rose at the beginning of the year, I would not be surprised if companies call that out as a drag on 2025 guidance. On Tuesday, crude settled below $76 and that will hopefully help ease concerns over a return of inflation.
Another item of note involves Artificial Intelligence (AI). Several tech companies are pledging an investment of $500 billion in AI infrastructure in the U.S. Some of those investments had previously been announced, but the commitment helped spur excitement about growth in the sector. Companies such as Oklo, which build and deploy small modular reactors used to power AI datacenters, have emerged as players in the AI space.
For today, I’m watching to see if stocks can get to a new all-time high. I’m also watching volatility which has steadily been falling recently. On Tuesday, VIX closed just over 15 and is down slightly in premarket. But mostly, I’m watching how the market positions itself ahead of next week which if filled with both earnings and economic data. There are some who believe January sets the tone for the year and as we near the end of the month, we’ll have plenty of data points to digest. As always, I would stick with your investing plans and long-term objectives.
tastytrade, Inc. commentary for educational purposes only. This content is not, nor is intended to be, trading or investment advice or a recommendation that any investment product or strategy is suitable for any person.