January 2nd Market Overview

Happy Thursday, welcome 2025.

Where's that Santa Rally again? A ton of headlines driving the kangaroo volatility in the markets today. We're definitely starting off 2025 with a bang. With the new administration taking office next week, I expect more volatility - 2025 is already keeping us on our toes.

I'm buckled up - the new year is here.

Let's dig in...

Executive Summary

• Major banks Morgan Stanley, Citigroup, and Bank of America have left the Net Zero Banking Alliance ahead of the new administration. While maintaining individual climate goals, this coordinated exit signals shifting ESG policy landscape.
  

• Gold is above $2,650, following a 27% gain in 2024 - its strongest yearly performance since 2010. JPMorgan and Goldman Sachs both target $3,000/oz for 2025, citing central bank purchases and potential Fed rate cuts as drivers.
  

• Manufacturing data disappointed globally - China's Caixin PMI fell to 50.5 (vs 51.7 expected), UK contracted at 47.0, and Eurozone weakened to 45.1.
  

• Mortgage rates hit 6.97%, the highest since July, while jobless claims dropped to 211,000, showing a tight labor market despite Fed tightening.

• The S&P 500 ended last year with four straight down days, a streak not seen since 1966.

Market Overview

Key Market Drivers

1. Manufacturing Impact on Markets: Global factory weakness triggered broader market effects - Chinese stocks had their worst start to a year since 2016 with a 3% drop, while U.S. industrial stocks faced pressure after being added to China's export control list
   

2. Dollar Index Surge: Climbed above 109, reaching levels not seen since November 2022, potentially pressuring multinational earnings
   

3. Tech Sector Pressure: Major tech names face hurdles with $AAPL offering rare China discounts and $TSLA reporting first-ever annual delivery decline
   

4. Market Internals Divergence: Despite index declines, market breadth remained positive with more stocks rising than falling on Nasdaq, suggesting rotation rather than broad selling
   

5. Financial Sector Realignment: The exodus of major banks from climate initiatives coincides with changes in regulatory oversight, with Wells Fargo analysts noting "most positive regulatory change environment for banks in 3 decades".
   

Stock Spotlight

• $TSLA: ▼ 6% after reporting 495,570 Q4 deliveries, marking first-ever annual delivery decline and missing 510,400 consensus
  

• $NET: ▲ 5% following Goldman Sachs double upgrade to Buy with $140 target, citing optimism around new leadership
  

• $CEG: ▲ 7% after securing record $1 billion in nuclear energy federal contracts
  

• $U: ▲ 9% following social media speculation from “Roaring Kitty” the GME fella
  

• $MU: Selected as primary DRAM supplier for Samsung’s Galaxy S25 series, first time beating Samsung for flagship devices

Big Name Updates

• $AAPL: ▼ 3% on China discount promotion and UBS lowering iPhone revenue forecasts, expecting 4% YoY decline
  

• $NVDA: ▲ 2.4% as BofA reiterates buy rating ahead of CES, highlighting robotics strategy and ‘physical AI’ theme
  

• $BA: Facing pressure after South Korean incident and addition to China’s export control list

Other Notable Company News

• $HOOD: December volumes exceeded expectations per Piper Sandler, maintaining $54 PT
  

• $SOFI: Downgraded to underperform, PT cut to $7 on stretched valuation metrics
  

• $BABA: Formed strategic partnership with AI startup 01:AI for industrial modeling

Sector Watch

Bond Market

The 10-year Treasury yield climbed throughout the session, reaching 4.6%. No real bond news today.

Policy Watch

Climate Alliance Shifts:

• Major banks exiting NZBA ahead of new administration

• Asset managers withdrawing from Climate Action 100+

• Glasgow Financial Alliance loosening participation requirements

Bank Regulatory Environment:

• Wells Fargo reports "most positive regulatory change environment for banks in 3 decades" with upcoming administration

• Analysts expect improvements in loans, deposits, capital markets, and regulatory oversight

• Changes anticipated to benefit bank EPS growth and operational leverage

Global Policy Updates:

• Bank of Korea chair states monetary policy alone "insufficient for economic stability"

• Advocates for deregulation and new industry development to boost markets

• Taiwan signals openness to "equal-footed exchanges" with China

• China adds 28 U.S. firms to export control list, including $BA, $LMT, $RTX, $GD

What to Watch

1. CES Technology Show - the world's largest tech conference devoted to consumer electronics:

• $NVDA CEO keynote expected to detail robotics strategy

• Focus on “physical AI” developments and Jetson Thor platform

2. Small Cap Performance:

• January Effect historically benefits smaller companies

3. Manufacturing Data Follow-through:

• Global weakness may pressure industrial sectors

• Impact on supply chain-related stocks

4. Tesla Investigation Developments:

• FBI probe into Las Vegas Cybertruck incident

• Potential impact on brand perception and sales

Thanks for reading
🙂 

- John