The US stock market is grappling with a challenging start to 2025, marked by a series of setbacks including the ongoing impact of President Donald Trump's trade policies and fluctuating performances in key sectors. As of now, 77% of companies have reported Earnings per Share (EPS) above estimates according to FactSet, providing some optimism amid the turbulence. However, the broader market sentiment remains cautious, largely influenced by recent developments in trade and technology sectors.
In a recent move, President Trump has agreed to delay the imposition of 25% tariffs on Canada and Mexico for one month. This decision comes as a temporary reprieve amid ongoing trade tensions, which have weighed heavily on market sentiment. The delay offers a brief window for negotiations but leaves investors uncertain about the long-term implications of the Trump administration's trade strategies.
The US stock market's performance has been notably lackluster in comparison to its European counterparts. In January, US blue-chip stock indices underperformed European indices, reflecting concerns over the domestic economic landscape. The tech sector, in particular, has faced significant headwinds. DeepSeek has exerted substantial pressure on US chip stocks, contributing to a decline in the semiconductor index by nearly 10% year-to-date (YTD).
Tech giants such as Nvidia, Apple, and Tesla have emerged as some of the weakest performers this year. Nvidia, once the world's most valuable company, has seen its stock fall by 13% YTD. The overall US tech sector recorded a loss of more than 2% last month, further underscoring the challenges faced by this critical industry.
Conversely, Meta has distinguished itself as a standout performer amid the broader market struggle. The company's robust performance has provided a glimmer of positivity in an otherwise challenging environment for tech stocks.
The market's attention is also keenly focused on labor market indicators. The Job Openings and Labor Turnover Survey (JOLTS) is expected to be closely watched ahead of the release of the January employment report on Friday. Projections indicate job openings could reach 8 million in December, a figure that will be scrutinized for insights into the labor market's health and its potential impact on economic growth.
In corporate earnings news, companies that have reported positive earnings for Q4 2024 have generally experienced a modest boost in share prices, with an average increase of 1.5% from two days before to two days after their earnings release. Palantir stands out with impressive results, having reported revenues that exceeded expectations by 36%. Consequently, Palantir's share price surged by 23% early on Tuesday, reflecting investor confidence in its strong financial performance.
Despite these pockets of positive news, President Trump's ongoing trade wars continue to cast a shadow over the market. The uncertainty surrounding future trade policies and their potential impact on global supply chains remains a significant source of concern for investors. This climate of uncertainty has contributed to the overall volatility seen in US stock markets.