Tech Hit in Late Hours as Alphabet, AMD Tumble: Markets Wrap

(Bloomberg) — Technology shares got hit in late hours as Alphabet Inc. and Advanced Micro Devices Inc.’s quarterly figures failed to inspire.

A $329 billion exchange-traded fund tracking the Nasdaq 100 (QQQ) slipped after the close of regular trading. Alphabet lost 7% as its revenue missed expectations after growth in the cloud business slowed. AMD slid 5% as disappointing results for its data center division signaled the company is not making gains on Nvidia Corp. in artificial-intelligence computing.

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In regular hours, a wave of dip buying lifted stocks after a wild day for financial markets, with big tech leading the way. Following a slide fueled by uncertainties over a trade war, the S&P 500 rose almost 1%. A Bloomberg gauge of the “Magnificent Seven” megacaps climbed 1.7%. Meta Platforms Inc. rose for a 12th consecutive session — its longest winning streak ever.

“Short-term market jitters have proven good short-term buying opportunities,” said Craig Johnson at Piper Sandler.

The latest reading on US job openings underscored a gradual slowdown on the labor front. To Krishna Guha at Evercore, the data eases upside risks into Friday’s employment report in a way that is helpful for the Federal Reserve and markets.

Meantime, the first volleys in the latest US-China trade war made clear that Xi Jinping is taking a more cautious approach than during Donald Trump’s first term. After the US leader gave a last-minute reprieve to both Canada and Mexico, his 10% tariffs on China took effect on Tuesday. Within seconds, Beijing announced additional tariffs on roughly 80 products to take effect on Feb. 10. 

“There is a reasonable likelihood that the ultimate impact from these tariffs may be less than expected,” said Todd Ahlsten at Parnassus Investments. “These tariffs may also represent the first round of an ultimate negotiation, which could reduce their ultimate impact.”

The S&P 500 rose 0.7%. The Nasdaq 100 climbed 1.3%. The Dow Jones Industrial Average added 0.3%. Palantir Technologies Inc. soared 24% on a bullish forecast. Merck & Co. sank 9.1% after halting shipments to China of its Gardasil vaccine. Estée Lauder Cos. sank 16% on a disappointing revenue outlook.

A UBS Group AG basket of stocks at risk from the proposed tariffs rebounded after losing over 6.5% in two days. The yield on 10-year Treasuries declined five basis points to 4.51%. The Bloomberg Dollar Spot Index fell 0.7%. The Mexican peso slid 0.6%. Canada’s loonie rose 0.8%.

As Corporate America reports fourth-quarter results, a chasm is opening between the seven biggest companies in the S&P 500 and everyone else. The giants are boosting their spending at a rapid pace, while the others are barely treading water.

The biggest companies — often called the Magnificent Seven — have been increasing their business outlays on things like property and equipment, spending 40% more on the category in 2024 than the year before, according to strategists at Societe Generale SA. The rest of the S&P 500 grew capital expenses by just 3.5% last year, the strategists added.

“The release of a seemingly more efficient AI model by Chinese startup DeepSeek has renewed questions about AI capex,” said BlackRock Investment Institute strategists including Jean Boivin and Wei Li. “We are in the AI buildout, with total capital investment by the “magnificent seven” mostly mega cap tech stocks on par with government R&D.”

The strategists say they see a “broadening set of AI beneficiaries” and stay overweight US stocks.

Technology was the only sector to decline in January as the S&P 500 managed a 2.7% gain for the month, well above the average January decline of 0.1% since 2000, according to data compiled by Bloomberg Intelligence.

“US stocks managed gains in January and bounced around all-time highs, but there’s turmoil beneath the surface,” said BI strategists Gina Martin Adams and Michael Casper. “Our market pulse index suggests sentiment is manic — a warning sign of a vulnerable market just as tariffs resurface as a major risk.”

The strategists noted there was limited turnover in component factors in January, with pairwise correlations, high minus low leverage performance and high-yield spreads in manic territory. The three other factors — price breadth, defensive minus cyclical sector performance, and low vs. high volatility performance — are neutral.

From 2012-23, in the three months after repeat Pulse readings above 0.6 (manic), the Russell 3000 delivered an average 2.9% total return and the S&P 500 outperformed the Russell 2000 by 178 basis points. Stronger returns tend to follow panic readings. The Russell 3000 had an average return of 9% three months later, and small caps led their large brethren by 133 basis points.

“This week will no doubt be a busy one as we follow the ‘telenovela’ that is the evolving tariff wars,” said Kristina Hooper at Invesco. “I would reiterate the importance of knowing your time horizon and acting accordingly. For the vast majority, that means to stay calm, diversified, and carry on.”

How about investors looking to be more tactical within their portfolio?

“Short-term selloffs are likely to present buying opportunities for those with a long enough time horizon if we see a similar scenario to the 2018-2019 tariff wars unfold again,” Hooper noted.

Nonetheless, a period of trade policy uncertainty could potentially weigh on markets until greater clarity emerges, she said.

“I’m cautiously optimistic that while we may see lots of drama, we may not see a meaningful long-term market impact,” Hooper said. “The market impact of the 2018-2019 US-China trade war subsided quickly once a resolution was reached.”

Corporate Highlights:

• Apple Inc. rolled out a new app for creating event invitations and made changes to its AppleCare+ customer support for iPhones, part of a broader push to generate more subscription revenue.
• Salesforce Inc. is cutting jobs as its latest fiscal year gets underway, according to a person familiar with the matter, even as the company simultaneously hires workers to sell new artificial intelligence products.
• PayPal Holdings Inc. reported slowing growth in its card-processing business even as fourth-quarter earnings topped analysts’ estimates.
• Spotify Technology SA posted another quarter of better-than-expected subscriber growth in the fourth quarter, helping the Swedish music company record its first-ever annual profit.
• Fox Corp.’s quarterly sales and earnings beat Wall Street forecasts, in part, on higher political ad spending. The company also revealed plans to launch a new streaming service before the end of the year.
• PepsiCo Inc. will respond to value-seeking US consumers with more variety in package sizes and healthier offerings, but won’t reduce prices across the board, the company said.
• Clorox Co. raised sales and earnings guidance for the current year while also reporting better-than-expected quarterly results, showing that the bleach maker’s business continues to recover from a 2023 hack that disrupted operations.
• Pfizer Inc.’s fourth quarter beat expectations on strong sales of its Covid vaccine and pill, bolstering its sales as it seeks to fend off criticism from an activist investor that has argued the company squandered its pandemic gains and needs a new path forward.
• Centene Corp. reported a fourth-quarter profit beat that was aided by a settlement related to payments for patients insured though Obamacare plans.
• Estée Lauder Cos. said it plans to eliminate between 5,800 to 7,000 positions in a corporate restructuring meant to return the flagging company to sales growth under its new chief executive officer.
• Archer-Daniels-Midland Co. is weighing asset divestitures as part of a plan to slash costs as the crop trading giant faces a downturn in profits.
• Apollo Global Management Inc.’s plan to tap wallets of rich clients is paying off, with its wealth business raking in record capital last year and boosting assets from the sector 50%.
• KKR & Co. raised its forecast for earnings from long-term private equity wagers and announced that it will increase its ownership in three investments.
• Grab Holdings Ltd. is weighing a takeover of rival GoTo Group at a valuation of more than $7 billion, accelerating talks for a combination to end years of losses in Southeast Asia’s competitive internet market.

Key events this week:

• China Caixin services PMI, Wednesday
• Eurozone HCOB Services PMI, PPI, Wednesday
• US trade, Wednesday
• Fed’s Austan Goolsbee, Tom Barkin, Michelle Bowman, Philip Jefferson speak, Wednesday
• Eurozone retail sales, Thursday
• UK rate decision, Thursday
• US initial jobless claims, Thursday
• Fed’s Christopher Waller, Lorie Logan speak, Thursday
• Amazon earnings, Thursday
• US nonfarm payrolls, unemployment, University of Michigan consumer sentiment, Friday
• Fed’s Michelle Bowman, Adriana Kugler speak, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.7% as of 4 p.m. New York time
• The Nasdaq 100 rose 1.3%
• The Dow Jones Industrial Average rose 0.3%
• The MSCI World Index rose 0.8%
• Bloomberg Magnificent 7 Total Return Index rose 1.7%
• The Russell 2000 Index rose 1.4%

Currencies

• The Bloomberg Dollar Spot Index fell 0.7%
• The euro rose 0.4% to $1.0385
• The British pound rose 0.3% to $1.2488
• The Japanese yen rose 0.3% to 154.27 per dollar
• The Mexican peso fell 0.6% to 20.4932
• The Canadian dollar rose 0.8% to 1.4318

Cryptocurrencies

• Bitcoin fell 3.2% to $98,672.92
• Ether fell 3% to $2,733.22

Bonds

• The yield on 10-year Treasuries declined five basis points to 4.51%
• Germany’s 10-year yield advanced one basis point to 2.40%
• Britain’s 10-year yield advanced three basis points to 4.52%

Commodities

• West Texas Intermediate crude fell 0.8% to $72.57 a barrel
• Spot gold rose 1% to $2,844.09 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Martin Keohan, Phil Kuntz, Robert Brand, Margaryta Kirakosian and Aya Wagatsuma.

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