/ January 28
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Friday:
Existing Home Sales (4.16M exp.)
S&P Global Services PMI -
Friday:
American Express AXP
NextEra Energy NEE
Verizon Communications VZ
Daily Briefing
Note - we are performing server upgrades today and website display metrics might be refreshed with several hours of delay
*Yesterday was a highly polarized trading day; big tech stocks, semiconductor-related names, and utility shares with AI exposure registered outsized declines while money rotated to other areas of the market;
*NVIDIA (NVDA, -17.0%) logged its largest single-day loss in market capitalization ever, driven by concerns over China’s DeepSeek AI model. This AI model attracted attention after it was perceived as much more cost-effective than U.S. alternatives, such as OpenAI’s ChatGPT - we’ve explored the subject in yesterday’s newsletter;
*SPY started the pre-market session down almost -3%, but gradually recovered throughout the day; technically, the benchmark equities ETF has successfully tested support at the 50-DMA, and bounced by the end of the session; it’s important for the 50-DMA to hold by the end of the week, after key earnings and economic announcements are in the books; resistance currently stands at $609 (M-Trend level);
*The MACD signal’s advance has been stopped in its tracks, but so far there’s little to suggest a negative crossover is imminent;
*The entire AI-related sector, which spans certain semiconductor names, software companies and utilities had an absolute bloodbath session due to the DeepSeek news; the potential of DeepSeek to challenge the competitiveness of leading U.S. AI players raised questions about the future direction of the sector, particularly if DeepSeek can deliver on its promises;
*In response, the PHLX Semiconductor Index (SOXX) has plummeted 9.2%, as investors reassess capital spending plans;
*Unfortunately, several Sigma Portfolio / Millennium Alpha stock picks got crushed in the process, namely NVIDIA (NVDA, -16.9%), Vistra Energy (VST, -28%) and Arista Networks (ANET, -22%); for now, we view the market reaction as exaggerated - shaving more than 1/5 of market value for the latter 2 companies just on news about software seems like a knee jerk response, which was amplified by algos;
*This weakness did not leak into the "rest" of the equity market as AI exuberance that led many names sharply higher was rung out of the market; in fact, more S&P 500 sectors closed higher (8) than lower (4);
*The Dow Jones Industrial Average rose +0.7%, with 20 of its 30 components in the green; meanwhile, the equal-weighted S&P 500 eked out a +0.1% gain, in contrast to the -1.5% drop in the market-cap weighted index;
*Market breadth was also more positive at the NYSE, where advancing issues lead decliners by a 3-to-2 ratio, though decliners outpace advancers at the Nasdaq by a 3-to-2 margin; sentiment barely moved south on the day;
*Investor caution was also palpable ahead of a busy earnings week, with around 40% of the S&P 500 by market capitalization set to report; among them are two of the three $3 trillion companies—Apple (AAPL, +3.2%) and Microsoft (MSFT, -2.1%);
*In the day’s economic data, December New Home Sales were reported at 698K vs consensus of 680K; new home sales growth was ahead of expectations in December, but selling prices jumped from the bottom of the range that was seen in 2024 toward the top, which presents a headwind to selling activity going forward;
*The overall flight to safety impacted in the fixed-income market; the 10-year yield dropped 10 basis points to 4.53% and the 2-year yield fell 8 basis points to 4.19%; also, a $69 billion 2-yr note sale met tepid demand and a $70 billion 5-yr note offering garnered stronger interest than the 2-yr sale;
*TLT gained +1.18%% but still remains in a precarious technical position due to trading below our stop level ($89);
*Signal Sigma Strategies are rebalancing portfolios today, but please bear with us while we complete our server upgrades in anticipation of the next app update; delays in the update of certain strategies and models are to be expected; we will cover all of the metrics in our weekly Portfolio Rebalancing Article later this week;