January 27, 2025 Newsletter
Tangents: Happy Monday. It’s International Holocaust Remembrance Day.
January 27,1880 American inventor Thomas Edison receives a patent for the incandescent light bulb, revolutionizing modern lighting and industry. Go to article.
January 27, 1973: Vietnam Peace Agreement signed.
Wolfgang A. Mozart, composer, b. 1756.
Lewis Carroll, writer, b. 1832.
Mikhail Baryshnikov, dancer, b. 1948.
AI can now replicate itself — a milestone that has experts terrified
Scientists say AI has crossed a critical ‘red line’ after demonstrating how two popular large language models could clone themselves. Read More.
Scientists discover pristine ancient forest frozen in time in Rocky Mountains
A melting ice patch in the Rocky Mountains uncovered an ancient forest, and these trees have stories to tell about dynamic landscapes and climate change.
A 2025 guide to Lunar New Year
What is Lunar New Year? And why do people wear red as part of the celebrations? Learn answers to these questions and more as we slither into the Year of the Snake.
Photo Gallery: McDonald’s in more than 55 countries
An award-winning food photographer experienced firsthand how McDonald’s incorporates local flavors into its menu items. See photos here.
Photo Gallery: McDonald’s in more than 55 countries
An award-winning food photographer experienced firsthand how McDonald’s incorporates local flavors into its menu items. See photos here.
Do you dread the blaring sound of your alarm clock?
Health experts explain why your phone may not be the best alarm clock if you want a good night’s sleep. Read More.
Bad Dürrenberg headdress: An elaborate 9,000-year-old headpiece worn by a female shaman in Europe
A lavish 9,000-year-old grave in central Germany revealed the burial of a powerful female shaman. Read More.
Pamukkale: Turkey’s ‘cotton castle’ of white limestone that inspired an ancient cult
The Pamukkale travertines are limestone slopes and thermal water pools that have attracted visitors since before the days of Ancient Greece, when the spa town of Hierapolis was founded at the top. Read More.
Degree in hand, jobs out of reach
Read why recent college graduates are struggling in a competitive job market.
It was really the greatest moment. It felt as if I used every ounce of energy I had. — Teenage snowboarder Hiroto Ogiwara, after making history at the X Games in Aspen by landing the first known 2340 in a competition — an impressive trick which consists of rotating six and a half times in the air. Watch the moment here.
PHOTOS OF THE DAY
Huanghan, China
Tourists visit Huangshan mountain as the spring festival approaches in Anhui province
Photograph: Shi Yalei/VCG/Getty Images
Kataragama, Sri Lanka
Devotees visit the Kiri Vehera Buddhist temple
Photograph: Ishara S Kodikara/AFP/Getty Images
A swan also looks a bit perplexed at a frozen lake in Kidderminster, UK
Photograph: Lee Hudson/Alamy Live News
Market Closes for January 25, 2025
Market Index |
Close | Change |
Dow Jones |
44713.58 | +289.33 |
+0.65% | ||
S&P 500 | 6012.28 | -88.96 |
-1.46% | ||
NASDAQ | 19341.84 | -612.46 |
-3.07% | ||
TSX | 25289.15 | -179.34 |
-0.70% |
International Markets
Market Index |
Close | Change |
NIKKEI | 38982.33 | -583.47 |
-1.47% | ||
HANG SENG |
20197.77 | +131.58 |
+0.66% | ||
SENSEX | 75366.17 | -824.29 |
-1.08% | ||
FTSE 100* | 8503.71 | +1.36 |
+0.02% |
Bonds
Bonds | % Yield | Previous % Yield |
CND. 10 Year Bond |
3.200 | 3.278 |
CND. 30 Year Bond |
3.353 | 3.421 |
U.S. 10 Year Bond |
4.5464 | 4.6214 |
U.S. 30 Year Bond |
4.7815 | 4.8453 |
Currencies
BOC Close | Today | Previous |
Canadian $ | 0.6948 | 0.6951 |
US $ |
1.4392 | 1.4386 |
Euro Rate 1 Euro= |
Inverse | |
Canadian $ | 1.5037 | 0.6650 |
US $ |
1.0449 | 0.9570 |
Commodities
Gold | Close | Previous |
London Gold Fix |
2776.80 | 2776.80 |
Oil | ||
WTI Crude Future | 73.17 | 74.93 |
MARKET COMMENTARY:
On this day in 1999, Securities and Exchange Commission Chairman Arthur Levitt warned the growing class of investors trading online to beware the dangers of fast and easy trading: “Investment should be for the long-run, not for minutes or hours.”
Canada
By Bloomberg Automation
(Bloomberg) — The S&P/TSX Composite fell 0.7% at 25,289.15 in Toronto.
The move was the biggest since falling 0.9% on Jan. 13 and follows the previous session’s increase of 0.1%.
Today, energy stocks led the market lower, as 6 of 11 sectors lost; 152 of 222 shares fell, while 69 rose.
Celestica Inc. contributed the most to the index decline and had the largest move, decreasing 28.0%.
Insights
* This month, the index rose 2.3%
* The index advanced 20% in the past 52 weeks. The MSCI AC Americas Index gained 22% in the same period
* The S&P/TSX Composite is 2.1% below its 52-week high on Dec. 9, 2024 and 23.6% above its low on Feb. 13, 2024
* The S&P/TSX Composite is up 0.5% in the past 5 days and rose 2% in the past 30 days
* S&P/TSX Composite is trading at a price-to-earnings ratio of 20.8 on a trailing basis and 17.4 times estimated earnings of its members for the coming year
* The index’s dividend yield is 2.8% on a trailing 12-month basis
* S&P/TSX Composite’s members have a total market capitalization of C$4.01t
* 30-day price volatility fell to 11.52% compared with 11.69% in the previous session and the average of 10.98% over the past month
================================================================
| Index Points | |
Sector Name | Move | % Change | Adv/Dec
================================================================
Energy | -100.2476| -2.3| 4/39
Information Technology| -46.9861| -1.8| 1/9
Materials | -45.5682| -1.5| 1/49
Utilities | -11.5775| -1.2| 6/9
Financials | -10.6419| -0.1| 11/15
Consumer Staples | -2.9969| -0.3| 3/7
Health Care | 0.2299| 0.3| 3/1
Consumer Discretionary| 2.7703| 0.3| 7/4
Real Estate | 4.0735| 0.8| 17/2
Communication Services| 14.7582| 2.5| 4/1
Industrials | 16.8386| 0.5| 12/16
================================================================
| | |Volume VS| YTD
|Index Points | | 20D AVG | Change
Top Contributors | Move | % Change | (%) | (%)
================================================================
Celestica | -39.9200| -28.0| 469.5| -5.2
Cameco | -36.8200| -15.0| 215.0| -7.6
TC Energy | -18.6100| -3.8| 1.0| -1.9
Canadian National | 7.6740| 1.3| -39.4| 5.1
Canadian Pacific Kansas | 9.5450| 1.3| 4.9| 11.4
Waste Connections | 10.4100| 2.3| -7.4| 5.9
US
By Rita Nazareth
(Bloomberg) — Wall Street had a rough start to the week on concern that a cheap artificial intelligence-model from Chinese startup DeepSeek could make valuations of the technology that has powered the bull market tough to justify.
From New York to London and Tokyo, equities got hammered.
While the slide came after a torrid rally to all-time highs, Monday’s selloff was triggered by a rise of DeepSeek’s latest AI model to the top of the Apple’s appstore.
The S&P 500 dropped 1.5% and the Nasdaq 100 sank 3%.
A closely watched gauge of chipmakers plunged the most since March 2020.
Nvidia Corp.’s 17% plunge erased $589 billion from its market capitalization — the largest in market history.
In a rush for safety, defensive industries like consumer staples and health care were bid.
Treasuries rallied, driving yields to the lowest levels this year.
Haven currencies including the yen and the Swiss franc climbed.
Energy firms expected to profit from unprecedented AI demand sank, led by a 21% beatdown for Constellation Energy Corp.
The crypto world got hit.
“What was shaping up to be a big week in the markets got even bigger with the disruption in the AI space,” said Chris Larkin at E*Trade from Morgan Stanley.
“That could make this week’s mega cap tech earnings even more critical to market sentiment.”
Monday’s plunge drove new fissures into a market narrative that prevailed since the re-election of Donald Trump in November, the America-first, tech-fueled uber bullishness that saw a clear upward path for risky assets spurred by deregulation, tax cuts and even government sponsorship of AI investment.
Treasury yields slid sharply as haven-seeking investors laid aside concern – for today, anyway – that the new president’s policies will stoke inflation.
The severity of the selloff in US assets was proportionate to the weightings of AI-enabled firms in the biggest stock indexes.
Even after a recent paring to curb their influence the cohort of Nvidia, Apple Inc., Microsoft Corp., Amazon.com Inc., Meta Platforms Inc. and Alphabet Inc. account for about 40% of the Nasdaq 100.
It’s roughly 30% in the S&P 500, leaving both gauges significantly exposed to concerted drops in those names.
“The sudden, adverse market reaction to DeepSeek indicates that some of the key assumptions that have been driving the AI trade, and hence major indices, are getting reassessed today,” said Steve Sosnick at Interactive Brokers.
“Part of the today’s sudden adverse market reaction was a direct result of a ‘wave of complacency’ that overtook the equity market.”
The Dow Jones Industrial Average added 0.7%.
A gauge of the “Magnificent Seven” mega caps slid 2.7%. The Philadelphia Stock Exchange Semiconductor Index fell 9.15%.
The Russell 2000 slipped 1%. Wall Street’s favorite volatility gauge — the VIX — soared the most since about mid-December.
The yield on 10-year Treasuries declined nine basis points to 4.53%.
The Bloomberg Dollar Spot Index rose 0.1%.
Bitcoin slid 2.9% to $101,481.84.
To Seema Shah at Principal Asset Management, valuations remain extended, and while vulnerabilities were expected this year, developments like DeepSeek highlight the need for diversification beyond the Magnificent Seven.
“I’m hoping this moment encourages everyone to look beyond tech stocks,” said Callie Cox at Ritholtz Wealth Management.
“Not because the AI story is doomed, but because there are so many opportunities in unloved sectors that have been ignored for so long. The guts of the market’s foundation are still good, so it’s likely that the dip will be bought here.”
At G Squared Private Wealth, Victoria Greene says that she’s “not convinced the bubble has burst,” but would be “silly” not to evaluate the potential risks.
“We are looking carefully at how the market progresses from here and if action needs to be taken to protect and shift portfolio allocations,” she noted.
“We are not panickers, so tend to be buyers of big dislocations that are happening in tech, energy, and infrastructure today.”
Paul Marino at Themes ETFs, says he likes the fact that people are skeptical.
“Anything that goes straight up to the sky parabolic, that’s when I get worried as a long-term investor,” he said.
The next leg lower for the biggest US tech stocks may come from the retail crowd, according to Tony Pasquariello at Goldman Sachs Group Inc.
“Tactically speaking, I suspect the next few days bring a hurried reduction of length by the retail community,” Pasquariello wrote in a note to clients Monday, adding that hedge funds have been aggressively reducing exposure for months, so this is really about the response of households.
However, he’s a true believer in the structural supremacy of US tech companies, which “arguably have only more incentive to spend.”
“We don’t know whether this is the ‘Sputnik Moment’ for stocks, but this is certainly a wakeup call that we are not the only game in town,” said Paul Nolte at Murphy & Sylvest Wealth Management.
“To put these very high valuations in the stocks thinking they have cornered the market is a huge mistake and that is being re-rated.”
To Matt Maley at Miller Tabak + Co., the idea that DeepSeek’s latest AI model is much more cost effective, and runs on much less-advanced chips, is raising some serious questions about what kind of earnings can be drawn from the AI phenomenon.
“If these companies look like they’re going to have a tough time maintaining their earnings growth (chip stocks) or a tough time reaching their earnings growth goals (the “picks and shovels” companies), it’s going to create some serious headwinds for today’s expensive stock market, he noted.
In fact, the slide in tech came at a time when the Nasdaq 100 is trading at 27 times estimated forward earnings, which is significantly above its 10-year average of 22.
Nvidia, which has led the way on AI technology, has a valuation multiple of 32.
All focus will be on earnings announcements from the likes of Microsoft and Apple this week to restore confidence in the so-called Magnificent Seven group of companies.
Investors are heading into yet another pivotal Big Tech earnings cycle with the companies’ shares near record highs and valuations stretched.
A key distinction this time: The group’s profit growth is projected to come in at the slowest pace in almost two years.
“This should be a fairly good earnings season, but the bar has been raised and they may not be able to live up to high expectations,” said Dan Taylor, chief investment officer at Man Numeric.
“It will be very difficult for the group to perform the way it did last year, especially as valuations have increased.”
“We think big tech can keep delivering on earnings, but misses could revive concerns that big capital spending on AI won’t pay off – one of three triggers to dial down our pro-risk view,” BlackRock Investment Institute strategists including Jean Boivin and Wei Li.
Metrics like capex-to-sales ratios and free cash flows suggest that, for now, mega cap tech firms are not overextended, they said.
Overinvestment should be assessed in aggregate, in our view, given AI’s potential to unlock new revenue streams across the economy, they concluded.
So what exactly is DeepSeek?
DeepSeek was founded in 2023 by Liang Wenfeng, the chief of AI-driven quant hedge fund High-Flyer.
The company develops AI models that are open-source, meaning the developer community at large can inspect and improve the software.
Its mobile app surged to the top of the iPhone download charts in the US after its release in early January.
The app distinguishes itself from other chatbots like OpenAI’s ChatGPT by articulating its reasoning before delivering a response to a prompt.
The company claims its R1 release offers performance on par with OpenAI’s latest and has granted license for individuals interested in developing chatbots using the technology to build on it.
Corporate Highlights:
* UBS Group AG has begun a wave of job cuts in its home market Switzerland, with hundreds of employees receiving notice in recent weeks, according to people familiar with the matter.
* Estée Lauder Cos is reviewing its portfolio of beauty brands, people with knowledge of the matter said, as the cosmetics company transitions to new leadership and looks to boost its share price.
* AT&T Inc. posted fourth-quarter results that beat Wall Street projections, including better-than-expected increases in mobile- phone customers and fiber-based internet subscribers, driven by seasonal promotions and bundled product offerings.
* Activist investor Ancora Holdings Group has nominated nine candidates for United States Steel Corp.’s board and is pushing for the company to abandon a takeover by Nippon Steel Corp.
* SoFi Technologies Inc., a fintech lender, published a forecast for profit that missed analysts’ estimates.
* MicroStrategy Inc. bought Bitcoin for a 12th consecutive week and unveiled details for the sale of perpetual preferred stock to help finance additional purchases of the cryptocurrency.
Key events this week:
* US consumer confidence, durable goods, Tuesday
* Fed rate decision followed by news conference by Chair Jerome Powell, Wednesday
* Canada rate decision, Wednesday
* Tesla, Microsoft, Meta, ASML earnings, Wednesday
* Eurozone ECB rate decision, consumer confidence, unemployment, GDP, Thursday
* US GDP, jobless claims, Thursday
* Apple, Deutsche Bank, Thursday
* ECB rate decision followed by news conference by President Christine Lagarde, Thursday
* US personal income & spending, PCE inflation, employment cost index, Friday
Some of the main moves in markets:
Stocks
* The S&P 500 fell 1.5% as of 4 p.m. New York time
* The Nasdaq 100 fell 3%
* The Dow Jones Industrial Average rose 0.7%
* The MSCI World Index fell 1.1%
* Bloomberg Magnificent 7 Total Return Index fell 2.7%
* Philadelphia Stock Exchange Semiconductor Index fell 9.1%
* The Russell 2000 Index fell 1%
Currencies
* The Bloomberg Dollar Spot Index rose 0.1%
* The euro was little changed at $1.0488
* The British pound was little changed at $1.2491
* The Japanese yen rose 0.9% to 154.59 per dollar
Cryptocurrencies
* Bitcoin fell 2.9% to $101,481.84
* Ether fell 4.5% to $3,149
Bonds
* The yield on 10-year Treasuries declined nine basis points to 4.53%
* Germany’s 10-year yield declined four basis points to 2.53%
* Britain’s 10-year yield declined four basis points to 4.59%
Commodities
* West Texas Intermediate crude fell 2.1% to $73.07 a barrel
* Spot gold fell 1.1% to $2,741.48 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Vildana Hajric, Margaryta Kirakosian, Allegra Catelli and Catherine Bosley.
Have a lovely evening.
Be magnificent!
As ever,
Carolann
What comes from the heart, goes to the heart. –Samuel Taylor Coleridge, 1772-1834.
Carolann Steinhoff, B.Sc., CFP®, CIM, CIWM
Senior Investment Advisor
Queensbury Securities Inc.,
St. Andrew’s Square,
Suite 340A, 730 View St.,
Victoria, B.C. V8W 3Y7
Tel: 778.430.5808
(C): 250.881.0801 (Text Only)
Toll Free: 1.877.430.5895
Fax: 778.430.5828
www.carolannsteinhoff.com