Key Takeaways
- Markets Remain Calm Despite South Korea’s Marshall Law And Repeal
- AI Stocks Surge With Salesforce And Marvell Leading Gains
- Amazon Challenges Nvidia With New AI Chips And Partnerships
Stocks were little changed on Tuesday in one of the lightest trading days of the year. All of the major indices were relatively unchanged on a day that began with jolting news out of South Korea. Today, however, brings some earnings, the ADP report on private payrolls and Fed Chairman Powell will also be speaking.
Tuesday morning began with news South Korean President Yoon Suk Yeol had declared Marshall Law, accusing the opposition Democratic Party of sympathizing with North Korea. But within just hours, the National Assembly voted to repeal the order. It was a lot of chaos that ultimately had a muted effect on markets. The order and subsequent repeal happened overnight in South Korea with many citizens sleeping through the entire ordeal. In the U.S., bonds initially rallied on the news but later pulled back as the situation began to stabilize. It is expected that the president will either step down or be impeached as a result of Tuesday. Also in international news, French Prime Minister Barnier’s Cabinet faces a no-confidence vote today. If the government were to collapse, it could have implications for the euro, weakening it more than it already is. What is interesting about this is the incoming Trump Administration favors a weak dollar in order to facilitate exports. The question here will be whether or not we begin seeing some sort of currency war should the euro continue weakening.
Back here at home, earnings season is just about over. As it stands, fourth quarter earnings appear to be up 5.8% compared with last year. That will mark the fifth straight quarter of growth. Perhaps most importantly, according to FactSet, only 61 out of 500 stocks issued negative forward guidance. That is the fewest number of companies to do so since the fourth quarter of 2021. One final S&P 500 company reporting earnings this morning was Salesforce. The big takeaway from this report was the guidance higher on enthusiasm over the company’s Artificial Intelligence (AI) chatbot Agentforce. That stock is trading higher by 14% in premarket. We also heard from Marvell, who beat on earnings on strong demand for AI. I think both these earnings show the AI trade is still strong and will likely carry over into first quarter earnings of next year, if not longer. Lastly, shares of Dollar Tree are up around 5% in premarket following earnings that beat forecasts
Speaking of AI, Amazon announced on Tuesday a massive AI supercomputer using its own homegrown Trainium chips. The company also announced a new server that will also be powered by the chips. What really stood out to me though was the revelation that Apple is a customer of the Trainium chips. The AI efforts are part of the AWS division and what this announcement really represents is Amazon’s entrance into the AI chip space as a competitor and alternative to Nvidia. I find this to be a very interesting development as Amazon has already made massive inroads in taking advertising dollars from Google and is now set to take on Nvidia. This is a company I’m going to be following very closely moving forward.
For today, Nasdaq futures are trading higher by over 0.5% on the back of the strong earnings from Salesforce and Marvell. That’s also having the effect of pulling volatility down even more, with the VIX trading just above 13 and closing in on some of its lowest levels of the year. The ADP report came in slightly weaker than expected so we’ll see if that is a precursor to Friday’s employment number. As always, I would stick with your investing plans and long-term objectives.
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