January 3rd Market Overview

Happy Friday everyone.

Is the Santa Claus effect back? Wall Street is shaking off the new year jitters today with a broad-based rally to close out the holiday-shortened week. I'm doing a deep dive article on emerging markets Sunday so don't miss it. Feel free to email me any write up ideas for the Sunday deep dive series.


Let's dig in...

Executive Summary

• Markets stage a broad recovery with 80% of S&P 500 stocks advancing, though weekly losses still on back of everyone minds (healthy breadth)
  

• $MSFT announces plans to spend $80 billion on AI-enabled data centers in fiscal 2025, with over half allocated to U.S. projects
  

• Manufacturing sector shows resilience with ISM index improving to 49.3
  

• President Biden blocks Nippon Steel's $14.9 billion acquisition of U.S. Steel on national security grounds

Market Overview

Key Market Drivers

1. Semiconductor Strength: Chip stocks lead gains, with $NVDA ▲ 4.3% and Super Micro Computer ▲ 9%, driven by continued AI infrastructure demand
   

2. Energy & Power Sector: Data center power demands boost energy producers, with $CEG and Vistra seeing notable gains on increasing AI infrastructure needs
   

3. Auto Sector Mixed Signals: $TSLA recovers ▲ 8% on record China sales despite first yearly decline in global deliveries; $F reports Q4 sales up 8.8% while $GM posts 21% Q4 growth
   

4. Santa Rally Momentum Shift: Market recovers from five consecutive down sessions, marking the longest losing streak since April 2024, with broad participation across sectors

Stock Spotlight

• $RIVN ▲ 24.94%: Delivered 14,200 EVs in Q4, bringing annual total to 51,580, exceeding analyst expectations of 13,400
  

• $TSLA ▲ 8.06%: Reports record high sales in China for 2024, offsetting global delivery concerns
  

• $NVDA ▲ 4.38%: Leads semiconductor rally amid continued AI infrastructure expansion
  

• $CEG ▲ 4.29%: Secures historic $1B federal nuclear power contract
  

• $X ▼ 6.04%: Shares decline after Biden blocks $14.9B Nippon Steel acquisition

Big Name Updates

• $MSFT: Plans to allocate over half of its $80B AI data center investment to U.S. facilities
  

• $JPM: Receives upgrade from Wolfe Research, citing robust EPS growth and market share gains
  

• $GM & $F: Report strongest annual U.S. sales since 2019, with Q4 showing particular strength

Other Notable Company News

• $CVNA ▼ 10.33%: Faces pressure from Hindenburg Research report questioning turnaround strategy
  

• $CHWY: Wolfe Research upgrades to outperform, citing potential international expansion
  

• Nuclear energy stocks up following $CEG's federal contract, with $OKLO ▲ 21% and $SMR ▲ 15%

Sector Watch

Bond Market

Richmond Fed President Barkin shapes market sentiment, stating "the economy is in a good place" while emphasizing 2025's focus will shift to supply-demand dynamics over monetary policy. His comments about fiscal policy and tariff uncertainties signal a patient approach to future rate decisions, influencing bond trader positioning.

Policy Watch

• Biden administration blocks Nippon Steel's $14.9B acquisition of $X citing national security, impacting steel sector outlook. CRU Group analyst notes $X "perfectly situated to run their assets" independently, though industry capacity reductions likely amid lagging prices.
  

• U.S. Surgeon General's cancer risk advisory rattles beverage stocks, with $TAP ▼ 3%. Report directly links alcohol to seven cancer types, particularly noting 16.4% of breast cancer cases.
  

• Richmond Fed's Barkin projects positive growth outlook while flagging key variables: trade policy under President-elect Trump, Congressional fiscal battles, inflation trends, and AI development trajectory.

What to Watch

1. AI Infrastructure Spending: With $MSFT's $80B fiscal 2025 data center investment announced today:

   • Watch data center REITs and power producers like $CEG, which jumped 4% on similar AI demand

   • Semiconductor supply chain implications, as $NVDA and chip stocks already showing strength on AI spending

   • Energy consumption impact - today's trading shows power producers $CEG and Vistra up 4% and 8% respectively on AI power demand
     

2. Manufacturing Sector Recovery: With December ISM at 49.3, up 0.9% from November:

   • January ISM report will be crucial for confirming if sector contraction is truly moderating

   • Watch industrial stocks as they navigate continued sub-50 ISM readings

   • Richmond Fed's Barkin notes supply-demand dynamics will be more important than monetary policy
     

3. Cross-Border M&A Activity: Following Biden's block of $X's $14.9B Nippon Steel deal:

   • Steel industry analyst Spoores notes capacity reductions likely as "prices are down, profits are down"

   • Cleveland-Cliffs' previous interest in $X worth monitoring, though analyst suggests unlikely

   • Watch for impact on other strategic industry deals as national security concerns heighten

   
   
   Thanks for reading 🙂
   
   - John