Morning in New York: uncertainty provokes correction

Daily review and forecast of events on the U.S. stock market from Mikhail Denislamov, Deputy Director of Freedom Capital Markets Research.

The central event of the last January session should be US President Donald Trump's nomination of a new Fed chief. Polymarket with 94% probability considers Kevin Warsh, who is perceived as a compromise figure, as the main contender for this position. In general, Warsh has the reputation of a "hawk", but recently has been in favor of accelerated rate cuts, which coincides with the position of the U.S. presidential administration. Against the backdrop of expectations related to the reshuffle in the leadership of the regulator, Treasury bond yields and the dollar are moving upward. In general, the market puts in quotations the risk of increasing pressure on the US monetary authorities from the White House.

Uncertainty is heightened by the ongoing risk of a US government shutdown: today the deadline for Congress to agree on a budget expires. The market estimates the probability of a temporary government shutdown at around 66%. If the shutdown is announced, we believe that it will last only a few days and its impact on stock market dynamics will be minimal.

This Friday, January 30, the Producer Price Index (PPI) for December will be released. The forecast for core PPI (excluding food and energy prices) suggests a 0.3% m/m increase, while the overall PPI is expected to rise by 0.25% m/m (November: 0% and 0.2%). In annualized terms, the index is expected to slow to 2.8% from 3% a month earlier. Chicago PMI business activity data for January (consensus: 44 points, December: 42.7 points) will also be released. If the index remains below 50 points, the recession will continue.

Escalating tensions over Iran, Washington's attempts to regulate relations between London and Beijing, and news of Congressional budget deliberations may overshadow today's macro statistics.

Exxon Mobil (XOM) and Chevron (CVX), Verizon (VZ), American Express (AXP), SoFi (SOFI), Regeneron (REGN) and Colgate-Palmolive (CL) will report quarterly results before the main session opens.

Futures on US stock indices show negative dynamics. We assess the balance of risks for the upcoming trades as negative amid pressure from the bond market, political uncertainty and mixed reaction to bigtech reports. Volatility will be elevated. We focus on S&P 500 fluctuations in the range of 6870-7000 points (from -1.4% to +0.5% to the closing level of the previous session).

- According to the Wall Street Journal, Amazon (AMZN) is in talks to invest up to $50 billion in OpenAI. The implementation of these plans will radically change the balance of power in the AI sector, intensifying competition between Amazon and Microsoft (MSFT).

- Apple's (AAPL) quarterly results beat analysts' expectations for revenue and profit thanks to strong demand for iPhones. An additional factor of optimism was reports about the development of its own memory chips in partnership with TSMC, which should reduce the company's dependence on external suppliers. At the pre-market, the tech giant's shares gained about 1%.

- Shares of SanDisk (SNDK) soared more than 15% after posting a strong earnings forecast and a strategic supply agreement amid strong demand from the AI industry.

- Western Digital (WDC) quotes are down about 3% despite strong financial guidance, which may be due to profit taking by investors after the recent rally.

- Despite KLA Corp (KLAC) reports exceeding Wall Street expectations, the issuer's securities collapsed by about 8%. The market reacted negatively to the conservative guideline on demand for chip manufacturing equipment, which triggered a wave of sell-offs in the semiconductor sector.

- Quotes Visa (V) declined by about 1% after the release of reports. Investors focused on the risks of slowing growth in payment volumes in the future, ignoring the increase in net income of the corporation on the background of high consumer activity.

- Medical giant Stryker (SYK) raised its full-year profit forecast on the back of strong medical device sales. Thanks to the strong financial results, the company's shares are up about 2% before the start of the main session.

Trades on January 29 on the American stock exchanges were characterized by increased volatility, ending in different directions. S&P 500 decreased by 0.13%, Nasdaq 100 dropped by 0.53%, Dow Jones grew by 0.11%, and Russell 2000 added a symbolic 0.05%.

The telecom sector (XLC: +2.6%) was the leader of growth thanks to the rally in Meta Platforms (META: +10.4%). At the same time, due to the collapse of Microsoft (MSFT: -9.99%) , the list of outsiders was headed by the technology sector (XLK: -1.58%).

The sharp gap in the dynamics of shares is explained by the activation of purchases in Meta's securities against the background of direct conversion of AI tools into the growth of its advertising revenue. At the same time, Microsoft's report caused concerns among stock exchange players that the shortage of server capacity will limit the short-term scaling potential of the corporation's Azure cloud segment.

Initial jobless claims came in at 209k with a consensus of 205k, the number of repeat claims fell to 1.827 million with average expectations at 1.86 million. The final estimate of third quarter productivity growth matched the preliminary estimate at 4.9%, unit labor costs fell 1.9%, which is favorable for the inflation picture.

Last November's trade deficit widened to $56.8 billion from October's $29.2 billion, against a forecast of $50.6 billion.

In general, macro data confirms the stability of the economy, so it positively affects the mood of stock exchange players.

Additional impact on the stock market was made by movements on commodity markets. Increased tension in the Middle East caused an increase in WTI oil prices by 3.5%. Copper rose by 4.6%.

-Royal Caribbean Group (RCL: +18.7% at the close of trading on Jan. 29) reported the highest booking volumes in its history and strong spending by cruise members, and gave a forecast that was markedly above average market expectations.

-Lockheed Martin (LMT: +4.2%) reported record backlog and strong free cash flow. An additional positive was the signing of a framework agreement to quadruple production of THAAD interceptors.

- Success in the aerospace segment, strong quarterly results and an increase in full-year earnings and revenue guidance drove Parker-Hannifin stock (PH: +3.5%) higher.

- Caterpillar (CAT: +3.4%) reported quarterly earnings above average market expectations. Its management forecasts revenue in 2026 at the upper end of the target range, despite the unfavorable impact of import tariffs.

- Free cash flow, which was noticeably above forecasts, smoothed the impression of Comcast's mixed report (CMCSA: +2.9%). Weak results of the media segment (Studios) and broadband revenues were offset by effective control of finances.

- A slowdown in Cloud Backlog growth to 25% disappointed SAP investors (SAP: -15.2%) despite an increase in operating profit.

-Thermo Fisher Scientific (TMO: -2.6%) reported a 140 bps decline in gross margin and weak free cash flow, although its revenue and earnings came in slightly above consensus.

This article was AI-translated and verified by a human editor