Market Update for the Week
The S&P 500 closed lower on Friday but managed to increase slightly over the week. At one point on Wednesday, it even crossed the 7,000 mark for the first time in history. It was, well, quite the week. Ten portfolio stocks, including some of the larger players, reported their earnings, and the Fed chose to keep interest rates steady on Wednesday. Software stocks took a hit on Thursday, and then on Friday, President Trump revealed his pick to succeed Jerome Powell as the Fed chair.
For the week, the S&P 500 showed a modest gain of 0.34%, while it has risen 1.37% so far this month. Interestingly, January gains typically suggest a positive trend for the rest of the year, according to what’s known as the January Barometer. The Nasdaq remained relatively stable, increasing just 0.95% throughout January. Here’s a quick rundown of the week’s market movers.
1. Technology Earnings
Meta Platforms and Microsoft both unveiled their earnings, leading to contrasting stock performances. Meta’s shares surged nearly 9% after it reported significant misses in revenue and earnings expectations—a bit surprising, really. Meanwhile, Microsoft saw its stock drop over 8% as investors reacted poorly to disappointing figures from its cloud computing sector. Despite that, we’re still optimistic about Microsoft. Apple, on the other hand, broke its eight-week losing streak, though not entirely based on profitability. Their management announced a strong quarter with iPhone sales climbing 23%, yet the stock fell on Friday, likely due to ongoing worries about memory shortages and their potential impact on costs. Personally, I’m less concerned about that.
On a positive note, GE Vernova hit a record high following its earnings report, and Corning also impressed with better-than-expected results, leading to a new contract worth $6 billion with Meta. Both stocks rose significantly last week, with GE Vernova up 10% and Corning by 11%.
2. Outside of Tech
Starbucks’ stock, however, fell by more than 6% despite what seemed like a solid quarter. Initially, it rose after their earnings report and a positive investor day, but those gains couldn’t hold. If this downward trend continues, it could be time to think about adding more shares. Honeywell achieved an all-time high on Friday after a strong earnings report, which included news about speeding up spinoff plans for its aerospace division. Industrial stocks climbed nearly 3% overall last week. Conversely, Dover dropped over 2% after taking profits from a solid performance. Their price target moved up from $210 to $220, but that didn’t seem to excite investors. Danaher’s report, also better than expected, failed to raise their stock price, and Boeing’s mixed results led to volatility, leaving both companies lower at week’s end.
3. Software Sector Struggles
Salesforce shares fell 7% for the week, particularly following a downturn in the enterprise software sector. We informed our members about strong growth in Salesforce despite recent challenges. ServiceNow also struggled, dropping 10% despite reporting decent results and aggressive share buyback movements. This decline seems to stem from a reevaluation of how much the market is willing to invest in SaaS companies, causing a compression in price-to-earnings ratios. It didn’t help when Microsoft reported a 10% drop in revenue on Thursday. Unfortunately, our cybersecurity stocks like Palo Alto Networks and CrowdStrike were caught in the downtrend, falling more than 4% and 5% respectively on Thursday, although we viewed these as potential buying opportunities.
4. Fed Developments
In a noteworthy week for the Fed, Chair Jerome Powell remarked on Wednesday about solid economic growth and some stabilization in employment. As a result, the Fed opted to keep interest rates unchanged after a series of cuts. Just days later, President Trump nominated Kevin Warsh to take over from Powell once his term ends in May. Warsh, who has previously served at the Fed, will need Senate confirmation. The market’s reaction to both events was fairly muted. Interestingly, gold and silver, which had spiked due to concerns over the Fed’s future independence, saw a considerable decline on Friday. Warsh is viewed as potentially more hawkish compared to other candidates.
In related news, we created a video on how to position your portfolio for this transition within the Fed. For our investment club members, trade alerts are sent out prior to any stocks being bought or sold—there’s a bit of a waiting period after alerts, which can sometimes be frustrating but is part of the process.
