January 7th Market Overview

Happy Tuesday everyone.

Markets turned lower today after new economic data showed the services sector is stronger than expected - making it less likely the Fed will cut rates soon.

Treasury yields hit their highest point since April, and tech stocks led the decline despite $NVDA's major AI announcements at world’s largest tech conference CES 2025.

Both $AAPL and $TSLA faced pressure from analyst downgrades creating a bit of a cascading effect across tech.

Let's dig in...

Executive Summary

• Treasury yields surge to 10-month highs after ISM services data shows persistent inflation pressures
  

• $NVDA unveils major AI initiatives at CES including Blackwell architecture and Cosmos robotics platform
  

• Significant rating changes hit tech giants: $AAPL downgraded by MoffettNathanson, $TSLA by BofA
  

• Getty Images and Shutterstock announce $3.7B merger, while Stryker agrees to acquire medical device maker Inari Medical for $4.9B

Market Overview

Key Market Drivers

1. Services Sector Shows Unexpected Strength: ISM services PMI beats at 54.1 vs 53.4 expected. Critical prices component surges 6.2 points to 64.4, signaling persistent inflation pressures. Employment and business activity components also showed expansion, challenging the Fed's rate cut timeline.
   

2. Bond Market Pressure Intensifies: 10-year Treasury yield spikes to 4.699%, highest since April. Sharp move reflects both strong economic data and growing concerns about proposed tariff policies. Market now pricing in later start to Fed rate cuts.
   

3. Global Inflation Picture Mixed: French inflation surprises at 1.3% vs 1.5% expected, first major European economy to report below-consensus December print. However, broader Eurozone inflation ticks up to 2.4% from 2.2%, with core steady at 2.7%, complicating ECB policy path.
   

4. China's Gold Strategy Shifts: Second straight month of reserve increases after 6-month pause, growing to 73.29M ounces from 72.96M in November. Move signals potential broader shifts in central bank reserve management and global monetary dynamics.
   

5. Market Sentiment Hit by CES tech conference Reception: Despite major AI announcements, tech sector faces selling pressure as investors question timeline and specifics around $NVDA's Blackwell production and broader industry innovation pace.

Stock Spotlight

• $NVDA ▼ 5.9%: Unveils revolutionary Project Digits, a $3,000 desktop AI supercomputer with GB10 Grace Blackwell Superchip, delivering 1,000x laptop power

• $GETY and $SSTK announce $3.7B merger, maintaining Getty name under current CEO Craig Peters

• $MRNA ▲ 14%: Leads healthcare sector after first U.S. human death from bird flu

• $INRI ▲ 22%: $SYK acquisition at $80/share values company at $4.9B

Big Name Updates

• $AAPL: MoffettNathanson downgrades to sell with $188 PT, cites weakest Mag7 growth and lukewarm AI features

• $TSLA ▼ 4.8%: NHTSA opens probe into 2.6M vehicles over Smart Summon feature; BofA downgrades on valuation

• $META: Implements community notes system over third-party fact-checkers; discontinues $1,500 Quest Pro

• $MSFT: Commits $3B to Indian Azure cloud expansion, strengthening AI infrastructure

Other Notable Company News

• $BAC: UBS upgrades to buy, PT $53, citing deregulation benefits and undervalued NII potential

• $ULTA: Raises Q4 guidance on strong holiday performance; CEO transition announced

• $ROKU: Named top 2025 pick by Needham, citing CTV ad growth and industry consolidation benefits

• $TCEHY: Added to U.S. Department of Defense “Chinese military companies” list

Sector Watch

Bond Market

Treasury yields hit significant technical levels with the 10-year yield climbing 7 basis points.

The spike represents the highest yield level since April, pressuring rate-sensitive sectors.

Policy Watch

ISM services data complicates the Fed’s rate decision timeline. The services prices index jump to 64.4 points signals persistent inflation pressures in key economic sectors.

This data, combined with strength in employment figures, suggests the Fed may need to maintain higher rates longer than most people anticipated. The fed has been hinting this though all last quarter imo.

What to Watch

1. CES 2025 Technology Rollouts:

• $NVDA Blackwell architecture implementation timeline

• Autonomous vehicle partnerships between tech and auto manufacturers

• Competition in desktop AI supercomputing space

2. Services Sector Momentum:

• Impact on January Fed meeting expectations

• Relationship between services prices and core inflation

• Labor market dynamics in services industries

3. M&A Activity Acceleration:

• Integration plans for $GETY-$SSTK merger (these might affect names like $ADBE)

• Potential consolidation in healthcare following $INRI acquisition

• Tech sector valuation impacts on deal flow

4. Tech Sector Recalibration:

• AI feature adoption rates across major platforms

• Impact of DOD classifications on Chinese tech

• Autonomous vehicle regulatory developments

  
  
  Thanks for reading 🙂
  
  - John