The U.S. stock market declined in the latest trading session as Wall Street reacted to President Donald Trump’s announcement of tariffs on China, Mexico, and Canada. Key sectors, including Oil & Gas, Basic Materials, and Consumer Goods, saw significant downturns. This pullback resulted in broad losses across major indices, with the Dow Jones Industrial Average dropping 0.75%, the S&P 500 slipping 0.51%, and the NASDAQ Composite falling 0.28%. Adding to investor unease, the latest inflation data revealed persistent price pressures above the Federal Reserve’s target, heightening concerns about the economic outlook.
Amazon Leads Dow Gains as Chevron and NVIDIA Struggle
Among the Dow’s top performers, Amazon.com Inc. led the charge with a gain of 1.30%, closing at 237.68. Other notable advances included Amgen Inc. (+0.49%) and Cisco Systems Inc. (+0.22%). Conversely, Chevron Corp. suffered a steep drop of 4.56%, falling to 149.19, exacerbated by the volatility in the oil markets. Meanwhile, NVIDIA’s shares fell by 3.67%, closing at 120.07, as concerns over the semiconductor sector weighed on investor sentiment. Sherwin-Williams Co. also experienced a decline, dropping by 2.02% to 358.16.
Source: Business Today
The S&P 500 showed a mixed bag, with Franklin Resources Inc. jumping by over 10%, followed by Eastman Chemical Company (+7.53%) and Vertex Pharmaceuticals Inc. (+5.31%). On the downside, Deckers Outdoor Corporation suffered a sharp decline of 20.51%, while Walgreens Boots Alliance Inc. lost 10.30%.
TCTM Kids IT Soars 330% as Small-Caps See Wild Swings
On the NASDAQ Composite, several emerging stocks saw massive gains, including TCTM Kids IT Education Inc., which surged by an astounding 329.82%. Reborn Coffee Inc. and Focus Universal Inc. also enjoyed impressive gains of 62.56% and 62.49%, respectively. However, several small-cap stocks saw significant downturns, notably Enveric Biosciences Inc. (-46.41%), NewGenIvf Group Ltd. (-42.47%), and Global Star Acquisition Inc. (-39.10%).
Source: The Guardian
Broad Sell-Off Hits Markets as Inflation and Trade Tensions Rise
Falling stocks outnumbered advancing ones significantly, indicating a broad-based sell-off across markets. This trend was reflected on both the New York Stock Exchange and the Nasdaq, with notable declines in shares such as Enveric Biosciences, which hit a 5-year low, and Global Star Acquisition, which hit its 52-week lows.
The CBOE Volatility Index (VIX), a key measure of investor sentiment, rose by 3.72% to 16.43, reflecting growing uncertainty and market volatility. This uncertainty was further fueled by the latest inflation data, which showed that the personal-consumption-expenditures (PCE) price index, the Federal Reserve’s preferred inflation gauge, rose by 0.3% in December, up from 0.1% in November. Over the past 12 months, the PCE index increased by 2.6%, while the core PCE index, which excludes volatile food and energy prices, rose by 2.8% year-over-year. This marks the third consecutive month that core PCE inflation has stalled at 2.8%, well above the Fed’s 2% target.
Source: CNN
In addition, international trade tensions, particularly those revolving around the agricultural sector, continue to add another layer of complexity to market dynamics. The US agriculture market is on edge as former President Trump’s threats of new tariffs on China, the European Union, Canada, Mexico, and Russia could lead to significant disruptions. Grains, pork, and other agricultural products are key exports to these nations, and any potential tariffs could result in price volatility in agricultural futures, leading to broader market impacts.
GLOBAL ISSUES
Oil Gains as Gold Slips and Dollar Strengthens
In the commodities market, crude oil prices showed some resilience. March delivery crude oil rose by 1.13%, settling at $73.55 per barrel, while Brent crude saw a smaller increase of 0.62%, trading at $76.36. Gold, however, retreated, falling by 0.42% to $2,833.39 per troy ounce.
Source: Market Watch
On the currency front, the US Dollar strengthened, with the Dollar Index rising by 0.61% to 108.29. The EUR/USD exchange rate showed only modest movement, while the USD/JPY surged by 0.59% to 155.09.
Global Risks Add to Market Volatility and Inflation Pressures
As the US economy grapples with these shifts, international issues continue to play a pivotal role in shaping market dynamics. Rising global oil prices are likely to increase inflationary pressures, affecting consumer sentiment and overall economic growth. Moreover, geopolitical tensions, such as trade disputes and shifts in the global supply chain, can influence market volatility, particularly in sectors sensitive to international trade. The agricultural market is a key example, as potential tariffs on US exports could trigger price volatility, especially in grains and livestock, further destabilizing market sentiment.
Source: GEP
WATCHOUT
Intel Struggles With Weak Outlook, Market Share Losses, and Leadership Uncertainty
On Friday, Benchmark analysts maintained their Hold rating on Intel Corporation (NASDAQ: INTC) following the company’s quarterly report, which slightly exceeded revenue and earnings expectations but posted a concerning negative EPS of $4.38. Despite annual revenue of $53.1 billion, Intel’s forward guidance did not meet seasonal projections, and seven analysts recently revised their earnings downward. The company faces challenges, including a weak computing environment, losing market share in the data center segment, and setbacks in its accelerated graphics processor designs, which hinder its ability to compete in the AI Cloud Data Center market.
Additionally, Intel’s lack of a permanent CEO adds uncertainty about its strategic direction. While the company is working to improve its competitive position, its future trajectory is dependent on leadership decisions and addressing operational hurdles. Intel’s stock performance, near its 52-week low with a market cap of $85.53 billion, will be influenced by developments in its leadership and efforts to overcome these challenges. Recent developments, such as delayed product releases and the announcement of new collaborations, highlight the company’s ongoing adjustments. Despite challenges, Intel remains focused on returning to positive free cash flow and improving its market position, which analysts from firms like Needham and Bernstein continue to monitor closely.
Option Smile Chart for INTC
- Our in-house system assigns a bullish index score of 0.735 on a scale where 0 represents completely bearish and 1 represents completely bullish.
- At near the current stock price (ATM), the implied volatility of the call options are on the average larger than that of the put options. That indicates the greed for a price hike is greater than the fear for a price fall
- There are big volumes of call options at the strike price 20 and 20.5. However, the put volumes are also substantial and this appear to indicate that traders are betting almost evenly on both the directions of the price. However in net term, the price is expected to reach and surpass 20.5.
- The open interest chart indicates that there is a major resistance at 20.
Investment Opportunity & Risk
Apple Inc. (NASDAQ: AAPL)
On Friday, Itau BBA reaffirmed its Market Perform rating on Apple stock with a price target of $254.00, citing concerns over the company’s growth prospects and competitive challenges, particularly in China. Despite a modest 2.61% revenue growth and a high P/E ratio of 39.11x, Apple is considered overvalued based on InvestingPro’s Fair Value model. Analysts pointed to stagnant earnings per share (EPS) growth over the past three years and a lack of a faster replacement cycle for Apple products.
While acknowledging potential advancements in edge AI technology, Itau BBA questioned whether the market can overlook Apple’s innovation issues compared to other tech firms. The recent recovery in Apple’s stock price, despite these concerns, has led to a more cautious outlook. Apple’s financial performance for the December quarter showed a 4% YoY revenue increase, with services, iPad, and Mac sales growing, although iPhone sales declined slightly. Analysts like Baird, Needham, and JPMorgan maintained positive ratings, while Jefferies and Redburn adjusted their price targets to $202.33 and $230, respectively.
Option Smile Chart for AAPL
- Our in-house system assigns a bullish index score of 0.707 on a scale where 0 represents completely bearish and 1 represents completely bullish.
- At near the current stock price (ATM), the implied volatility of the put options is slightly higher than that of the call options. This the typical characteristics of the implied volatility smile chart which shows that usually fear is bigger than greed.
- There is a big volume of call option at the strike price 250 and also averagely the call option volumes is larger than the put option volumes. The current sentiment is indicating that traders are committing their bet that the stock price will surpass 250.
- The open interest chart indicates that there is a resistance at 220 to which the price will fall to if the stock turns bearish and there are 2 resistance level at 250 and 260 which may act as the temporary price ceilings if the stock turn bullish.
KLA Corporation (NASDAQ:KLAC)
TD Cowen’s Krish Sankar raised the price target for KLA Corporation (NASDAQ:KLAC) to $770 from $725, maintaining a Hold rating following the company’s better-than-expected results and guidance. KLA, with a market capitalization of $101.68 billion, reported strong performance, including 12.15% revenue growth in the last 12 months, bolstered by spending in the DRAM and Foundry/Logic sectors.
Despite risks associated with China, KLA’s exposure is expected to decrease, with China anticipated to account for 29% of total sales in 2025, down from 41% in 2024. The company has a healthy financial position, evidenced by a current ratio of 2.36 and moderate debt levels. Analysts have revised price targets upward, with Stifel, Cantor Fitzgerald, Needham, Morgan Stanley, and Goldman Sachs increasing their targets, citing KLA’s strong performance and growth prospects. Although China’s impact on KLA’s sales remains a concern, the company’s fundamentals are robust, with impressive dividend growth. KLA’s guidance for 2025 suggests further market share expansion, despite challenges in the China market.
Option Smile Chart for KLAC
- Our in-house system assigns a bullish index score of 0.766 on a scale where 0 represents completely bearish and 1 represents completely bullish.
- At near the current stock price (ATM), the implied volatility of both the call and put options are on the average almost equal. That is signifying the excitement for a price hike is equal to the fear for a price fall
- There are big volume of call options at the strike price 790, 800 and 860. And also averagely the call option volumes is larger than the put option volumes. The current sentiment is indicating that traders are committing their bet that the stock price will surpass 800 and hopefully touches 860.
- The open interest chart indicates that there is a minor resistance at 750 at which the price may stutter. If the price turn bearish, there are layers of support which may slow the downfall at 660, 640 and 600.
The above option analysis is based on the situation at the close of the January 30 market.
CONCLUSION
- Market movements highlight the interconnected nature of the global economy.
- Investors must navigate sectoral shifts, commodity price changes, and currency fluctuations.
- The Federal Reserve’s inflation battle continues, with core PCE inflation staying above 2%.
- A prolonged inflation fight may delay future interest rate cuts.
- International tariff concerns could impact key U.S. agricultural exports.
- Global and domestic economic factors will shape the U.S. stock market’s trajectory.
- Investors must stay vigilant amid an increasingly uncertain market landscape.
Please note that all information in this newsletter is for illustration and educational purposes only. It does not constitute financial advice or a recommendation to buy or sell any investment products or services.
About the Author
Rein Chua is the co-founder and Head of Training at AlgoMerchant. He has over 15 years of experience in cross-asset trading, portfolio management, and entrepreneurship. Major media outlets like Business Times, Yahoo News, and TechInAsia have featured him. Rein has spoken at financial institutions such as SGX, IDX, and ShareInvestor, sharing insights on the future of investing influenced by Artificial Intelligence and finance. He also founded the InvestPro Channel to educate traders and investors.
Rein Chua
Quant Trader, Investor, Financial Analyst, Vlogger, & Writer.
