Weekly Market Mornings (January 26) Stocks Skyrocket: Mega-Cap Earnings Week Ahead Sparks Major Rally

Last Week’s Reports

Economic Reports

In January, the S&P Global Flash US Composite PMI dropped to 52.4. This shows the slowest growth in the US private sector in nine months. However, manufacturing started growing again with a PMI of 50.1, after six months of shrinking. The service sector also fell, with a PMI of 52.8. 

Companies are very optimistic about the future, leading to the highest hiring rate in two and a half years, thanks to the new government’s policies. However, inflation is rising, with costs and prices increasing rapidly in both manufacturing and services.

The latest jobless claims report in the U.S. shows a slight rise in unemployment. Initial jobless claims went up to 223K, which was more than expected. This is the biggest increase in six weeks. 

Also, Continuing claims also rose to 1899K and the average number of jobless claims over the past four weeks slightly increased. These increases suggest a small rise in layoffs and unemployment. However, the job market remains strong overall, with continued job growth and low unemployment rates.

In December, existing home sales in the US increased by 2.2%. Despite high mortgage rates, the market showed strong recovery. The improving market is attributed to job and wage gains and consumer confidence in the benefits of homeownership.

In January, the University of Michigan consumer sentiment was revised down to 71.1 and below December.. 

People felt better about their personal finances for the fifth month in a row, despite a 4% drop in overall sentiment. Although incomes rose, 47% of people expect unemployment to increase.

Inflation expectations for the next year rose to 3.3%, the highest since May 2024. Long-term expectations went up to 3.2%. Consumers are worried about future inflation and are buying items in advance to avoid price hikes.

Earnings Reports

Netflix

Netflix (NFLX) Q4 revenue grew by 16% year-over-year, slightly beating expectations despite a strong US dollar, due to higher membership growth and ad sales.

Average paid memberships increased by 15%, and the average revenue per member rose by 1%, or 3% when excluding currency changes.

Membership growth was strong across all types of content, regions, and due to typical Q4 seasonality. The company added 19 million paid members, the most in its history.

Netflix’s stock NFLX broke its previous all-time high after releasing a strong earnings report.

3M

3M (MMM) Q4 2024 revenue reached $6 billion, marking a slight increase year-over-year. Adjusted sales were $5.8 billion, reflecting a 2.1% growth compared to the previous year. 

The company’s Earnings Per Share (EPS) were $1.68, slightly above expectations. The operating margin stood at 18.1% for GAAP and 19.7% when adjusted.

Free cash flow for Q4 was $1.3 billion. During this quarter, 3M returned $1.1 billion to shareholders through dividends and share repurchases.

Looking ahead to 2025, 3M provided financial guidance, expecting organic sales growth between 2% and 3%, and an EPS ranging from $7.6 to $7.9.

MMM stock surged past its previous all-time high following the release of a robust earnings report.

GE

GE Aerospace (GE) reported impressive revenue growth of 14% and a significant increase in profit margins.

The company’s earnings per share (EPS) of $1.32 (adjusted) exceeded expectations, signaling better-than-expected performance.

GE Aerospace provided optimistic financial guidance for 2025, projecting double-digit revenue and EPS growth, which reassured investors about the company’s future prospects

Total orders surged by 46% year-over-year to $15.5 billion, indicating strong demand for GE’s products and services.

GE stock soared to a new all-time high after releasing a strong earnings report.

Indices

Indices’ Weekly Performance:

The S&P 500 stayed flat but remained near record highs. Also, all three indexes gained 2% over the week.

Trump mentioned that his administration prefers not to impose tariffs on China, which helps avoid higher costs for manufacturers.

He also decided not to impose restrictions on the EU but repeated his earlier warning about tariffs on Mexico and Canada.

The price has risen quickly to a resistance level. There are some unfilled price gaps below that may need attention. Currently, buyers are in control, but a pause or slight pullback at this level would be reasonable.

Also, the current market outlook leans bullish, especially over the long-term.

Stocks

Sector’s Weekly Performance:

Source: Finviz

• Communication Services: The sector gained 4.7% due to strong earnings, increased media and entertainment demand.
• Technology: The sector grew by 3.4% following President Trump’s announcement of the massive $500 billion AI “Stargate” project.
• Industrials: The sector increased by 2.9% due to strong manufacturing data, increased infrastructure spending.
• Healthcare: The sector grew by 2.7% due to gains from pharma, advances in medical tech.
• Financial: The sector increased by 2.3% due to rising interest rates, robust reports from banks.
• Basic Materials: The sector increased by 1.8% due to rising commodity prices, increased manufacturing PMI.
• Real Estate: The sector increased by 1.1% due to strong housing market data.
• Energy: The sector declined by 1.4% due to falling oil prices and concerns over supply glut.

Stock Market Weekly Performance:

Source: Finviz

Top Performing Stocks

The stock market saw some impressive performances last week, with several stocks making significant gains. Here are the top performers and the reasons behind their success:

• Oracle (ORCL): The stock surged by 14%, after announcing a $500 billion AI-focused joint venture with OpenAI and SoftBank, led by Masayoshi Son. This partnership aims to build new AI infrastructure in the U.S.
• Netflix (NFLX): The stock increased by 13.9%, driven by the release of positive earnings with significant growth in subscriber numbers.
• Abbott Laboratories (ABT): The stock rose by 10.1% as a result of strong earnings in medical devices and diagnostics, along with high demand for their healthcare products.
• Palantir Technologies (PLTR): The stock climbed by 10% after Voyager Technologies, backed by Palantir Technologies, has filed for an initial public offering (IPO).
• Constellation Energy (CEG): The stock grew by 9.8%, after Wells Fargo increased its target.
• Arm Holdings plc (ARM): The stock advanced by 8.9% following President Trump’s announcement of the massive $500 billion AI “Stargate” project.
• Eli Lilly (LLY): The stock grew by 8.2% due to a surge in pharmaceuticals and biotech stocks.
• GE Aerospace (GE): The stock climbed by 7.6%, driven by strong performance in the positive earnings reports.
• Charles Schwab (SCHW): The stock advanced by 7% due to strong earnings and positive financial performance in the brokerage and banking sectors.

Commodity

Weekly Performance of Gold, Silver, WTI and Brent Oil:

Source: Finviz

Gold prices rose above $2,770 per ounce last week, the highest since October and close to the record high of $2,790. 

This increase was due to a weaker dollar and President Trump’s call for lower interest rates. In a video speech at the World Economic Forum in Davos, Trump advocated for lower rates without directly mentioning the Federal Reserve. Traders are buying safe-haven assets due to uncertainty over Trump’s tariffs and immigration policies. 

Traders are also watching global central banks’ policy announcements. The Bank of Japan raised interest rates on Friday, the U.S. Fed is expected to hold rates next week, and the ECB is likely to cut them. Gold is set for its fourth consecutive weekly gain.

WTI crude oil futures posted their first weekly loss in five weeks, retreating after a New Year’s rally driven by increased Russia sanctions, winter weather demand, and a two-month decline in U.S. stockpiles. Crude oil still lacks direction as President Trump raises the prospect of trade wars that could cause prices to rally while also calling for OPEC to ramp up production.

Forex

Weekly Performance of Major Foreign Exchange Pairs:

The DXY dropped below 107.5 last week, hitting a one-month low because other major currencies performed well. Markets are reconsidering inflationary policies proposed by President Trump, who again mentioned boosting energy output and reducing business regulations at the World Economic Forum. However, he didn’t focus on tariffs against China, which reduced inflation worries for imported goods.

Unemployment claims in the US reached a three-year high, indicating that restrictive monetary policies are affecting the labor market. 

The Bank of Japan (BoJ) raised its key interest rate and gave a positive outlook, strengthening the yen against the dollar. 

Meanwhile, the euro and pound strengthened against the dollar last week.  Also, higher inflation shown by PMI reports may limit the rate cuts planned by the European Central Bank (ECB) and the Bank of England (BoE)

Crypto

Crypto Market Weekly Performance:

Source: quantifycrypto

Bitcoin reached an all-time high of $108,000 but then pulled back, making a fake breakout before falling below that level. The initial surge was driven by bullish market sentiment, but it couldn’t hold and retracted due to profit-taking and a lack of sustained buying interest.

Also, President Trump signed an order banning the creation and promotion of government-backed digital currencies. He supports private sector digital currencies and dollar-backed stablecoins instead.

Next Week’s Outlook

Economic Events 

In the US, the Fed is expected to keep the federal funds rate between 4.25% and 4.5%, taking a break after cutting rates three times in 2024. Traders will watch closely for the Fed’s plans for 2025, especially since they hinted in December that there might only be two rate cuts in 2025. 

Key economic reports will also be important, including the first estimate of Q4 GDP growth, expected at 3% per year, slightly down from 3.1% in Q3. 

Also, the PCE report will offer insights into inflation, which is the Fed’s favorite measure. 

Other important data will include new and pending home sales, the Chicago Fed National Activity Index, and several other economic indicators.

In Canada, the central bank is expected to lower interest rates by another 0.25%, marking the sixth consecutive cut.

Earnings Events 

On the earnings front, it will be an action-packed week. 

Tech giants Microsoft (MSFT), Meta (META), Tesla (TSLA), and Apple (AAPL) are set to report their quarterly results, alongside other major companies such as AT&T (T), Boeing (BA), Lockheed Martin (LMT), Starbucks (SBUX), T-Mobile (TMUS), ServiceNow (NOW), IBM (IBM), Danaher (DHR), Visa (V), Mastercard (MA), Blackstone (BX), Caterpillar (CAT), United Parcel Service (UPS), Exxon Mobile (XOM), AbbVie (ABBV), and Chevron (CVX).