Stock Buyers Step In to Boost Tech After AI Jolt: Markets Wrap

(Bloomberg) — The world’s largest technology companies climbed after a selloff that shook global markets, with traders gearing up for the start of the megacap earnings season and the Federal Reserve decision on rates.

Equities rebounded, with the S&P 500 up about 1% and the Nasdaq 100 rising 1.6%. Following a plunge that erased almost $600 billion in value, Nvidia Corp. rallied 8.9%. Microsoft Corp. is in talks to acquire the US arm of ByteDance Ltd.’s TikTok, according to President Donald Trump. The software giant rose 2.9%. While tech bounced back, most shares in the US equity benchmark actually fell — a reversion of the move in the previous session. In late hours, Starbucks Corp. climbed as its sales slump eased.

A relative sense of calm prevailed after 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.

“Was it a bit unnerving? Yes, for some. Should you panic? Not at all,” said Kenny Polcari at SlateStone Wealth. “If you talk to anyone that bought stock yesterday, they loved the opportunity to buy some of these names at a deep discount. In the end, no matter how this plays out, competition is good. And remember, you get what you pay for.”

A key test for AI bulls will be the start of the big-tech earnings season, with Microsoft, Meta Platforms Inc. and Tesla Inc. reporting Wednesday. While profits from the Magnificent Seven behemoths are still rising — and far outpacing the rest of the market — growth is projected to come in at the slowest pace in almost two years.

“The dust is now settling after Monday’s long overdue AI reckoning, and while we still believe in the AI-driven productivity story, investing in this sector going forward may not be as easy as it was over the past two years,” said Emily Bowersock Hill at Bowersock Capital Partners. “We expect investors to be more discerning and selective when it comes to AI investing.”

As the Fed’s two-day meeting began, investors have accepted that officials probably won’t be cutting rates this time. But they’re looking for any signal from Chair Jerome Powell on which way inflation is going. A survey conducted by 22V Research shows 67% of respondents expect the reaction to the Fed Wednesday to be “mixed/negligible,” 21% said “risk-off” and 12% “risk-on.”

A gauge of the Magnificent Seven megacaps climbed 2.7%. The Dow Jones Industrial Average gained 0.3%. The Russell 2000 added 0.2%. Boeing Co. rose 1.5% as its chief is optimistic the company can return to a key production target for its 737 airliner this year. JetBlue Airways Corp. tumbled 26% after projecting higher costs this year than Wall Street expected.

The yield on 10-year Treasuries was little changed at 4.54%. The Bloomberg Dollar Spot Index rose 0.3%.

A punishing selloff in technology stocks on Monday spelled opportunity for dip-buyers prowling in the $11 trillion ETF arena. 

As the Invesco QQQ Trust Series 1 (ticker QQQ) sank nearly 3% on Monday — spooked by Chinese startup DeepSeek’s AI progress — investors poured $4.3 billion into the tech-heavy fund — its biggest one-day haul since 2021. The same impulse drove a record $1 billion into the GraniteShares 2x Long NVDA Daily ETF (NVDL), and almost $1.3 billion into the Direxion Daily Semiconductors Bull 3x Shares (SOXL), Bloomberg data show, despite double-digit plunges in both funds.

“While much of the market took a ‘jump first, ask questions later’ approach to the DeepSeek news yesterday, our position is more balanced,” said Tony Kim at BlackRock. “This singular ‘moment’ and its impact along the AI stack emphasizes the importance of a dynamic and active approach to investment in the AI space.”

Craig Johnson at Piper Sandler noted that the fact that more stocks rose than fell during Monday’s selloff was a “a clear sign of strength beyond the AI sector as this market rally broadens out.”

At Wolfe Research, Chris Senyek said while the focus on DeepSeek rattled markets to start the week, the reaction was overblown in the short term.

“With that said, this news flow probably caps P/E multiples for data center driven industrials and power names to which AI enthusiasm had spread,” he said. “This makes upcoming earnings season all that more important.”

Meantime, Fed officials are widely expected to hold borrowing costs steady on Wednesday against a backdrop of healthy demand and stubborn inflation.

“Simply put, the strong US fundamental story of strong growth, elevated inflation, and a more hawkish Fed continues to favor higher US yields and a stronger dollar,” Win Thin at Brown Brothers Harriman, wrote in a note. 

By some measures, this Fed meeting is expected to be relatively uneventful for the stock market. Options traders are betting on modest swings in equities, with the S&P 500 forecast to move 0.8% in either direction on Wednesday, below the 1.1% average realized move on Fed days over the past 18 months, data compiled by Piper Sandler show.

“Markets are not expecting a cut and will focus on what the Fed projects for the rest of 2025,” said Bowersock Hill. “Both inflation and interest rates are going to remain higher for longer – we would not be surprised to see one rate cut in 2025, or even none.”

Corporate Highlights:

• Uber Technologies Inc. is working on a new paid offering that would let commuters lock in prices for frequent rides ahead of time, rivaling a popular feature that Lyft Inc. launched five months ago.
• Starbucks Corp. is reorganizing its top ranks as part of Chief Executive Officer Brian Niccol’s plan to win back customers by speeding up service and making cafes feel more upscale.
• Royal Caribbean Cruises Ltd. reported a full-year profit forecast that blew past expectations as cruise demand continues to ramp up. It also announced its first foray into the river cruise market.
• Chevron Corp., investor Engine No. 1 and GE Vernova Inc. formed a partnership to develop natural gas-fired power plants next to data centers, aiming to tap into artificial intelligence’s surging demand for electricity.
• Defense company Lockheed Martin Corp.’s earnings per share forecast for 2025 fell short of the average analyst estimate.
• Aerospace and defense manufacturer RTX Corp. is “fully prepared” to support President Donald Trump’s ambitions to build an orbital missile defense system to protect the US.
• Kimberly-Clark Corp., the maker of Scott toilet paper and Huggies diapers, reported profit that missed expectations as its turnaround plan runs up against broader challenges.
• LVMH’s sales of fashion and leather goods declined in the fourth quarter, casting doubt on the prospects for a quick recovery in luxury demand.

Key events this week:

• US Fed rate decision, Wednesday
• Tesla, Microsoft, Meta, ASML earnings, Wednesday
• Canada rate decision, Wednesday
• Eurozone ECB rate decision, consumer confidence, unemployment, GDP, Thursday
• US GDP, jobless claims, Thursday
• Apple, Deutsche Bank earnings, Thursday
• US personal income & spending, PCE inflation, employment cost index, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.9% as of 4 p.m. New York time
• The Nasdaq 100 rose 1.6%
• The Dow Jones Industrial Average rose 0.3%
• The MSCI World Index rose 0.6%
• Bloomberg Magnificent 7 Total Return Index rose 2.7%
• The Russell 2000 Index rose 0.2%

Currencies

• The Bloomberg Dollar Spot Index rose 0.3%
• The euro fell 0.6% to $1.0431
• The British pound fell 0.5% to $1.2441
• The Japanese yen fell 0.6% to 155.51 per dollar

Cryptocurrencies

• Bitcoin was little changed at $101,308.68
• Ether fell 1.9% to $3,100.09

Bonds

• The yield on 10-year Treasuries was little changed at 4.54%
• Germany’s 10-year yield advanced three basis points to 2.56%
• Britain’s 10-year yield advanced three basis points to 4.61%

Commodities

• West Texas Intermediate crude rose 1% to $73.93 a barrel
• Spot gold rose 0.8% to $2,763.63 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Isabelle Lee, Rheaa Rao, Margaryta Kirakosian, Robert Brand and Winnie Hsu.

©2025 Bloomberg L.P.