2/3/2025

Good Morning.

The Fed announced it would keep rates at the current benchmark of 4.25%-4.50%. Despite pressure from President Trump the Fed will likely continue to keep rates steady as they continue to analyze inflation data and wait for impacts of potential tariffs policies. In addition it's important to note inflation grew in December. 

(PCE for December 2.6%, Barons)

Barclays has struck a major outage leaving customers without access to its online and mobile services. This outage highlights the importance of IT spending in the banking sector. Banks spend $650 B on IT each year. Spending on this critical technology is soaring and outages like this show why it's necessary. 

(IT spending for major banks, McKinsey)

USAID distributed $43.8 B in 2024. The agency is a main pillar of Washington’s strategy in influencing and aiding foreign nations. Its funding has been used to counter Chinese influence in developing nations. President Trump has frozen this spending, putting into question this strategy. 

In today’s newsletter we will cover: 

• Markets

  • Major U.S. stock indexes 

  • GOLD Record High

  • Tech Earnings

    • Microsoft 

    • Meta

    • Tesla 

    • Apple 

• DeepSeek Disruption

• Imminent Tariffs

• What to look out for this week

Markets 

• Major U.S. stock indexes regained upward momentum after a weak December. For the month of January the Dow surged 4%, the S&P 500 added nearly 3%, and the NASDAQ climbed almost 2%. The rebound signals renewed investor confidence following year-end market declines in 2024.

• GOLD Record High: Gold rose 1% for the week, surpassing its previous record from three months ago. On Friday, it traded above $2,800 per ounce for the first time, up from $2,000 a year ago.

Tech Earnings 

• Microsoft beat estimates. Revenue up 12% and EPS grew 10% YoY, driven by cloud and AI growth (AI revenue +175% YoY). Shares dropped 4% as investors questioned the effectiveness of Microsoft’s $80B CAPEX plan in sustaining its AI edge.

• Meta: Q4 sales surged 21% YoY, while net income jumped 49% to $20.8B from $14B. Zuckerberg: "We now have a U.S. administration that prioritizes American technology winning." 

  • Over 3.2 billion people now use at least one Meta app daily. 

• Tesla’s Earnings Miss: Q4 2024 EPS: $0.73, missing $0.76 forecast; Revenue: $25.71B, below $27.23B expectation. Record deliveries & energy storage growth; cost per car dropped below $35K; Model Y was 2024’s best-selling vehicle globally. 2025 plans: Redesigned Model Y, affordable EV launch, and 10,000 Optimus robots production target. Musk: Tesla could become the "most valuable company in the world," citing autonomous vehicles & humanoid robots as key drivers. Challenges: Battery constraints, regulatory hurdles, and rising EV/AI competition. 

• Apple: “Today Apple is reporting our best quarter ever, with revenue of $124.3 billion, up 4 percent from a year ago,” said Tim Cook, Apple's CEO. This stock is up 5.32% for the week.

US GDP 2024

• Q4 GDP grew 2.3%, slightly below forecasts, but full-year 2024 growth reached a solid 2.5%.

• Consumer spending surged 4.2%, the highest since early 2023, while business investment remained sluggish.

• A strong labor market and easing inflation are expected to support continued expansion in 2025.

Deep Seek Disruption

• On Monday AI stocks and related strategies plummeted after the sudden releases of a Chinese AI chatbot called DeepSeek. The company is claiming that the development costs of its model are a fraction of the existing models, notably of U.S. tech giants. A development cost as low as $5.6 M dwarfs the billion dollar investments by U.S. companies to train models.

• As DeepSeek surged to the top of the app store, U.S. rivals plummeted. If DeepSeek’s claims are true it disrupts the status quo of current AI sentiment. Companies have gotten used to paying large sums of money for power hungry data centers to run large computing necessary for their technology. DeepSeek has potentially created a product that makes this spending unnecessary. While many tech companies suffered because of this increased competition, the possibility of more efficient technology should be a silver lining. If U.S companies are able to find a way to develop AI models with significantly less capital expenditures it could be a game changer. In the meantime there will be lengthy investigations into the legitimacy of DeepSeek and a potential revaluation of how companies will invest in AI.

(One day losses Monday 1/27/2025, Reuters)

Imminent Tariffs

• President Trump signed an executive order for tariffs on goods coming into the U.S. The Tariffs are broad and cover almost all goods. China will face 10% tariffs while Canada and Mexico will be hit with 25% tariffs. These nations alone make up nearly half of U.S. imports. 

• Canada and Mexico have both already promised similar Tariffs in reaction. The situation is still rapidly unfolding. The U.S. dollar has risen 1% (2/2/2025) since the announcement.  

What To Look Out For This Week!

Monday: Earnings: Palantir 

Tuesday: Earnings: Google, Advanced Micro Devices 

Wednesday: Earnings: Walt Disney, Qualcomm

Thursday: Earnings: Amazon

Friday: U.S. employment report  

We are two college students on a mission to immerse ourselves in the financial industry. We are eager to learn more and make new connections. Our goal is to share exciting and informative content that provides a broad picture of current events and offers valuable insights.

Authors: Ben Banchik, Zachary Singer

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