Market RecapFour of the Mag 7 names showed up in the top 10 detractors from performance for the S&P 500, contributing to -121% of that index’s result. Despite this, broad equity indexes ended yesterday ahead, with the Russell 2000 adding 1.41%, the Dow gaining 0.71%, the SP 500 rising 0.39% and the Nasdaq Composite closing 0.19% higher. Looking at the S&P 500 index, the list of top 10 contributors to return, while led by Nvidia (NVDA) had a good mix of sector names represented, including Amgen (AMGN), Costco (COST), Visa (V), and JP Morgan Chase (JPM).Sector-wise, Materials, Consumer Discretionary, and Communication Services posted the only negative results due to their respective Mag 7 components closing lower, at least for the last two mentioned. The remaining sector results ranged from 0.07% (Industrials) to 1.57% (Real Estate). Volatility retreated as the Cboe Market Volatility Index (VIX) settled down 8.37% to 15.77 while gold was nudged higher to $2,865/oz. Oil priced just over 2% lower as markets reacted to Tuesday’s EIA update that US reserves were unexpectedly high.From a Tematica model perspective, the market’s reaction to Alphabet’s (GOOG, GOOGL) earnings helped guide AI lower but a number of other technology-oriented strategies posted healthy gains, including Digital Infrastructure, Cybersecurity, Data Privacy, Cloud Computing, CHIPs Act, and what passes for tech adjacent these days, Nuclear Energy & Uranium. Aside from technology-focused strategies, EPS Diplomats and Cash Strapped Consumer also participated in yesterday’s bounce.
Apple Sourcing Changes and Why Fed Speakers May Lean More HawkishFutures point to equities making further gains when the market opens later this morning. Sizing up those futures, however, we find those for the S&P 500 are, at least of this writing, ahead of those for the Nasdaq Composite. The reason likely stems from the downward pull from the shares of Arm Holdings (ARM) and Skyworks (SWKS) following their quarterly results last night.Arm delivered a solid beat for its December quarter and highlighted how AI demand is driving strong momentum across Arm’s ecosystem. The company guided current quarter revenue to $1.175-$1.275 billion, implying year-on-year growth of 32% at the midpoint but the range for that guidance was wider than usual due to timing uncertainties around large licensing deals. While the market may not like that we find the company’s comment that “advances in AI, both for training and inference, are going to increase the demand for compute in the AI Cloud” to be very supportive of our AI, Cloud Computing, and Digital Infrastructure models.Turning to Skyworks, its shares plunged more than 20% in post-market trading last night, after the company reported a greater-than-anticipated fall in quarterly revenue and forecasted a mid-to-high teens sequential decline in sales from its biggest segment. That key end market is smartphones where Apple (AAPL) is a top customer. Sizing up that outlook against others, including competitor Qorvo (QRVO) we have ask whether it is the market or simply Skyworks losing market share inside its largest customer? Earnings call comments about the move from sole sourcing by Skyworks on key programs to dual source points to the latter. Longer-term Apple intends to leverage its Apple Silicon efforts to bring at least some of its RF chip needs in-house.With little in the way of fresh economic data today, while the market waits for Friday’s January Employment Report investors will be focusing on quarterly results from Hershey Foods (HSY), Hilton (HLT), Honeywell (HON), Peloton (PTON), Roblox (RBLX) and Yum! Brands (YUM) this morning. Also catching their attention after yesterday’s stronger-than-expected ADP Employment Report will be comments from multiple Fed speakers. Given the favorable employment data also seen in yesterday’s ISM Service PMI and prices that remain elevated, odds are the comments will skew more hawkish than not.Continuing the earnings deluge, after the market close Amazon (AMZN), Affirm (AFRM), Cloudflare (NET), Fortinet (FTNT), and Lumentum (LITE) will report, bringing more than a few helpful data points for some of our targeted exposure models seen below.Based on the figures we saw from ADP this week, but also data contained in various January PMI reports, we see a good chance for an upside surprise in Friday’s January Employment Report. As of this morning, the market consensus sees 170,000 jobs being added, down from the 256,000 created in December. If our thinking is correct, tomorrow’s report would not only lead to a positive revision in initial GDP forecasts for the current quarter, it would also be another that says the Fed is in no rush to deliver its next rate cut. While the CME Fed Watch Tool indicates the market still sees a rate cut in June, it looks increasingly likely to us that timing will slip into 2H 2025.More By This Author:With Tariffs Of The Table, Focus Returns To Earnings Digesting More Big Tech Earnings, Waiting For Friday’s January PCE ReportTrump Telegraphs Tariff Intentions, Earnings Accelerate, What To Watch
