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You have to hand it to the stock market. It handled yesterday's DeepSeek news quite well. Granted the AI, semiconductor, and power producing stocks did not, yet they were at the center of the DeepSeek storm.
In brief, market participants were able to compartmentalize the news, recognizing that it was not an adverse economic development. It was actually a positive development on a larger scale in that it exposed the potential to develop AI, and make use of AI applications, with a (much) lower cost approach that could conceivably speed up advancements with AI technology.
That isn't a bad thing, but of course it upended many of the stocks that were afforded special status as being key to that development effort. They are still key to that effort, but yesterday's material declines made it clear that growth prospects and company valuations were being called into serious question.
The selling also exposed the dangers of concentration risk and the travails of a momentum trade that unwinds on fundamental, technical, and emotional factors. NVIDIA (NVDA) saw its market cap plunge by nearly $600 billion, earning it the distinction of suffering the largest, single-day loss in market capitalization ever that dropped it below its 200-day moving average for the first time in two years.
There is some healing activity this morning that has propped up NVIDIA and others, which in turn has helped prop up the equity futures market.
Currently, the S&P 500 futures are up seven points and are trading 0.1% above fair value, the Nasdaq 100 futures are up 36 points and are trading 0.2% above fair value, and the Dow Jones Industrial Average futures are down 60 points and are trading 0.1% below fair value.
This is not the strongest of buy-the-dip trades, which goes to show market participants are still taking stock of yesterday's shocking price action and are perhaps waiting to see how the earnings reports this week from Microsoft (MSFT), Apple (AAPL), Meta Platforms (META), Amazon.com (AMZN), and Tesla (TSLA) play out.
The reaction to earnings reports this morning from Boeing (BA), General Motors (GM), Kimberly-Clark (KMB), Royal Caribbean (RCL), and Lockheed Martin (LMT) to name a few has been mixed.
Those results have been digested alongside the news that Scott Bessent was confirmed as Treasury Secretary, that President Trump wants tariffs larger than 2.5% on foreign pharmaceuticals, semiconductors, and metals, according to Bloomberg, and some weaker-than-expected durable goods orders in December.
Briefly, new orders for durable goods declined 2.2% month-over-month in December (Briefing.com consensus 0.4%) following a downwardly revised 2.0% month-over-month decline (from -1.1%) in November. Excluding transportation, durable goods orders increased 0.3% (Briefing.com consensus 0.5%) following a downwardly revised 0.2% decline (from -0.1%) in November.
The key takeaway from the report, though, is the understanding that new orders for nondefense capital goods excluding aircraft -- a proxy for business spending -- were up 0.5% on the heels of a 0.9% increase in November, thereby softening the disappointment of the headline number.
