By Teresa Rivas
There's only so much a market can take.
This past week, stocks careened from panic over China's DeepSeek chatbot to Big Tech earnings to the latest Federal Reserve meeting, only to look like they would emerge unscathed. Then came the tariff threats.
The S&P 500 index finally finished the week down 1%. That's still noteworthy, considering how hard the artificial-intelligence theme and Nvidia's stock -- one of the key drivers of the market's strength -- were hit.
Monday's rout reflected the market's anxiety that if a scrappy open-source Chinese model really can match ChatGPT, AI could be significantly cheaper than previously anticipated. That's a potential boon to users but a blow to the megacap tech stocks pouring billions into their own projects -- and the idea that American AI was leaps and bounds ahead of the rest of the world.
It's a big shift, though it remains to be seen just how much changes because of it. "[We] are still shocked that tech investors believe the Temu of AI DeepSeek is going to dramatically alter the $2 trillion of AI [expenditures] expected over the next three years," writes Wedbush analyst Dan Ives.
Almost immediately, attention turned to earnings from Meta Platforms, Tesla, Apple, and Microsoft. They did their best to reassure the market, with the first three succeeding and the last falling short. Overall, though, investors took some comfort from management commentary. Many even looked on the bright side.
Yet for all the fears about Silicon Valley's AI supremacy, the S&P 500 index was nearly unchanged for the week through Thursday's close: It hadn't revisited Monday's low point, and there were 333 gainers in the index, compared with 169 stocks that lost ground. "The fact that short-term breadth remains solid is a sign of market strength," noted Ned Davis Research strategist Ed Clissold.
The economic data, too, seemed to line up OK, writes Sevens Report President Tom Essaye. From a weak, but not too weak, fourth-quarter gross-domestic-product reading to strength in consumer spending, it was "mostly Goldilocks," he writes. And even the Federal Reserve, seemingly in wait-and-see mode, didn't shake things up and ended up having little impact on stocks.
Nonetheless, it's rarely a quiet day now in Washington, D.C., and a sustained rally is never a sure thing. On Friday, President Donald Trump reiterated that 25% tariffs on Mexico and Canada were probably coming, and that fact turned a nice rally into a drop on Friday as his rhetoric heated up.
"[It] is U.S. trade policy that has again stolen the headlines," writes James Reilly, senior markets economist at Capital Economics. "It is unclear what tariffs, if any, will be announced this weekend; but what seems clearer is that it will not stop here."
Maybe it's time to take a vacation.
Write to Teresa Rivas at teresa.rivas@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
January 31, 2025 18:48 ET (23:48 GMT)
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