January 23rd Market Overview

Happy Thursday.

Big money is moving. The Saudi Crown Prince pledged $600B in U.S. investments over four years.

$SPY up record highs today.

Trump's WEF speech demanded "immediate" rate cuts and cheaper oil. Institutional traders aren't flinching before tonight's historic Bank of Japan decision - hedging costs sit at multi-month lows with the VIX sitting below $15. All in all we have had a pretty tame week, all things considered.

Let's dig in...

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Executive Summary

• S&P 500 hits record highs after Trump’s WEF address demands “immediate” rate cuts and lower oil prices amid strong institutional buying
  

• Saudi Crown Prince announces plans to boost U.S. investments by $600B over next four years, driving broad market optimism
  

• Defense sector reaches all-time high as $ITA ▲ 2.4%, marking best monthly performance since October 2022 ($iShares US Aerospace & Defense ETF)
  

• American Airlines ($AAL) ▼ 8% signals potential airline sector weakness with disappointing Q1 guidance, despite solid Q4 results
  

Market Overview

Key Market Drivers

1. Federal Reserve expectations: CME FedWatch Tool shows 99% probability of rates remaining unchanged next week, as Trump calls for cuts
   

2. Earnings momentum: Netflix and major banks exceed expectations, though $AAL's weak guidance raises concerns about transportation sector outlook
   

3. Technology sector dynamics: SK Hynix results provide positive readthrough for AI chip demand, despite broader tech pullback
   

4. Japanese market dynamics: Despite anticipated BOJ rate hike tonight, institutional hedging costs remain unusually low - notable $6M premium VIX call order at strike 21 suggests traders aren’t seriously hedging against potential Yen volatility, contrasting sharply with August’s market reaction
   

Stock Spotlight

• $GE: ▲ 9% after Q4 results beat with EPS of $1.32 vs $1.04 expected

• $EA: ▼ 17% after slashing FY25 guidance, citing weakness in Global Football franchise

• $AAL: ▼ 8% on Q1 guidance projecting loss of $0.20-$0.40 per share

• $ORCL: ▲ 15% weekly gain after joint venture announcement with SoftBank and OpenAI

Big Name Updates

• $AAPL: Goldman maintains buy rating, adjusts PT to $280 on iPhone growth outlook

• $META: BofA lifts PT to $710, citing AI contribution to ad revenues

• $TSLA: Oppenheimer flags Trump relationship risks, announces Canada price increases

• $PLTR: Wedbush boosts PT to $90, positions as potential enterprise software leader

Other Notable Company News

• $IONQ: Partners with Busan for quantum tech development

• $QCOM: Secures exclusive Snapdragon 8 Elite deal for Samsung Galaxy S25

• $ENPH: IQ8 Microinverters now compliant with Build America, Buy America Act

• $PYPL: EVP/Chief Product Officer John Kim departure set for March 31, 2025

Sector Watch

Bond Market

Short-term Treasury yields declined following Trump’s WEF demands for immediate rate cuts.

• Bank of America’s latest analysis points to unprecedented debt challenges ahead - projecting U.S. government debt could surge to $40T in the first 100 days of the new administration.
  

• The firm highlights a critical refinancing period in 2025, with $9T of debt maturing - a $3T increase from 2024. This debt maturity wall comes at a time when markets remain sensitive to interest rate movements and fiscal policy shifts.

Policy Watch

• EU launches ambitious tech initiative focusing on AI and clean technology development, directly challenging U.S. and China’s dominance in the space - signals potential shift in global tech competition landscape
  

• ByteDance evaluates strategic alternatives for TikTok’s U.S. operations beyond outright sale, while committing ¥150B ($20.6B) to global AI infrastructure and data centers in 2025
  

• Trump administration shapes healthcare policy direction with Don Dempsey appointment at OMB - bringing significant health industry lobbying experience to budget oversight role
  

• BlackRock’s Larry Fink endorses Trump administration’s private sector approach to economic growth, highlighting potential shift in public-private sector dynamics

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What to Watch

1. Bank of Japan Decision Tonight:

• First potential rate hike in 17 years comes as markets show unusual calm

• Institutional hedging costs at multi-month lows despite August’s market volatility

• Large $6M VIX call option position at strike 21 suggests contained risk expectations

• Forex markets pricing minimal probability of significant JPY movement

2. Federal Reserve Meeting Next Week:

• CME FedWatch Tool shows 99% probability of rates holding at 5.25-5.50% range

• Focus shifts to Powell’s commentary on Trump’s rate cut demands

• Markets will scrutinize updated economic projections amid strong GDP data

• Timing of potential rate cuts remains central focus after recent inflation data

3. ByteDance’s Strategic Moves:

• Plans ¥150B ($20.6B) capex for 2025, marking largest investment in company history

• 50% earmarked for international markets, particularly AI infrastructure

• Data center expansion signals push to compete with Microsoft and Google in AI

• TikTok U.S. operations exploring alternatives beyond complete divestiture

4. Tech Sector Earnings Signals:

• SK Hynix reports surge in AI chip demand, positive indicator for $NVDA's Q4

• $AAPL supplier IQE’s raised outlook suggests iPhone demand exceeding expectations

• Wedbush maintains $AAPL could still hit December/March iPhone estimates

• Goldman Sachs projects 1% year-over-year iPhone revenue growth in Q1, driven by 5% ASP increases