This week, the U.S. stock market found itself in a precarious situation, caught between the seismic shifts caused by artificial intelligence (AI) advancements and the looming threat of tariffsThe atmosphere was electrified on Monday when DeepSeek, a notable player, sent shockwaves through Silicon Valley, causing AI stocks to plummetNvidia, as a leading entity in the AI sector, saw its market capitalization evaporate by over $80 billion in a single dayThis unexpected shift raised serious concerns among investors about the sustainability of the United States' dominant position in the AI landscape.

However, as the week progressed and major American technology companies began to release their most recent financial reports, there was a notable recovery among tech stocksDespite the initial downturn, the results from these corporate giants were a mix of optimism and caution, revealing the underlying resilience within the market.

More specifically, major players in the tech industry delivered a blend of performances in their earnings reportsMeta, for instance, managed to uplift market sentiment, boosted by an advertising business that exceeded expectationsTesla, on the other hand, stabilized its position through effective cost management, showcasing a strategic approach to hold onto its market shareApple’s services segment achieved record revenues, further solidifying its financial healthIn contrast, Microsoft faced challenges as its cloud business reported slower growth, weighing heavily on its stock price.

According to Ed Clissold, a strategist at Ned Davis Research, by Thursday, 333 stocks in the S&P 500 index had recorded gainsThis indicator suggests that, despite fluctuations, there remains a noteworthy degree of market resilience that cannot be overlooked.

Additionally, the week was marked by the release of various economic data which provided crucial insights into market dynamics, offering investors and analysts a fresh perspective on the economic outlook

Advertisements

Notably, the data largely aligned with market expectations, instilling a sense of confidence in the steady development of the economyTom Essaye, president of Sevens Report, lauded the economic performance, describing the current landscape as 'just right.' For example, the growth rate of 2.9% in GDP for the fourth quarter was particularly bright, signaling neither economic overheating nor potential risks from excessive expansionThis steady growth presents a solid foundation for development across various sectorsMoreover, the core Personal Consumption Expenditures (PCE) price index registered a mere 0.2% month-on-month increase in December, reflecting that inflation remains in a manageable range and instilling confidence in price stabilityAlongside, consumer spending jumped by 0.7%, further showcasing consumer enthusiasm and market vitality, thus fueling economic growthTogether, these data constructs painted a vivid picture of a 'soft landing' for the economy.

Furthermore, analysis indicated that the Federal Reserve's decision to maintain interest rates at the same level during its Thursday meeting offered the market a sense of stability, easing fears of immediate changes in monetary policy.

Buoyed by these various factors, the market started to show signs of recovery, nearly reclaiming prior lossesHowever, this upward momentum faced a significant challenge on Friday.

On January 31, U.S. spokesperson Carolyn Levitt announced at a briefing that a 25% tariff on goods from Mexico and Canada would commence on February 1. Once this news broke, the stock market experienced a sudden reversal, with the S&P 500 index dropping by 0.7% in one day, pushing the weekly decline to 1%.

Economists at Goldman Sachs, including Jenny Grimberg, pointed out that the current pricing of retaliatory or general tariff risks in the stock market appears inadequate; therefore, the introduction of such tariffs could easily trigger a market correction.

James Reilly, a senior market economist at Capital Economics, cautioned, 'This is just the beginning of uncertainty surrounding trade policies.'

Gilles Guibout, head of European equities at Axa IM, shared insights, stating, 'The market has already priced in a significant amount regarding U.S. tariffs, but there remains the possibility of unexpected risks emerging.'

Daniel Skelly, director of the market research and strategy team at Morgan Stanley Wealth Management, analyzed the situation, saying, 'We have already pointed out the potential volatility surrounding tariffs, and today we saw it reflected in the market

Advertisements

Advertisements

Advertisements

Advertisements