The $.SPX(.SPX)$ and $NASDAQ 100(NDX)$ returned -0.45% and -0.67% last week as the Santa Claus rally took a pause.
Major market movers include $Apple(AAPL)$ (-4.79%), $Tesla Motors(TSLA)$ (-4.92%), $Microsoft(MSFT)$ (-1.67%), $Broadcom(AVGO)$ (-3.81%), $Netflix(NFLX)$ (-2.92%), Nvidia (+5.44%), Constellation Energy (+11.42%), Vistra (+16.24%), Uber (+5.66%), and Chevron (+2.67%).
Major economic events include JOLTS Job Openings on Tuesday, Unemployment Claims and FOMC minutes on Wednesday, and Non-Farm Payroll on Friday.
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Weekly: Jobs report and CES highlight the week after a shaky start
What You Should Know Before Starting Your Week
1) January Effect May Lift Stocks Higher
The January Effect is a market phenomenon where stocks tend to rise during the first month of the year. The January Effect occurs because investors often sell losing stocks in December to offset taxable gains and repurchase them in January.
Since 1970, the $.SPX(.SPX)$ has provided a positive return 58% of the time in January. The 50-year average return in January is 1.05%.
Thus far, the S&P 500 has returned 1.05% in January.
Source: Bloomberg
2) Microsoft Plans to Spend $80 Billion on AI, Indicating Rising Spending for AI Infrastructure
In FY 2025, Microsoft is on track to invest approximately $80 billion to build out AI-enabled data centers to train AI models and deploy AI and cloud-based applications globally. This suggests that the AI boom may be far from over.
We may hear more hyperscalers increasing their AI capex spending, which could benefit Nvidia.
3) AI Stocks Went Up on CES Optimism
Several AI stocks have risen in the past few days ahead of the Consumer Electronics Show (CES) 2025. The CES event is expected to boost investor sentiment toward AI stocks.
The CES trade show kicks off on Jan. 6 with a keynote address from Nvidia's CEO, Jensen Huang. He is expected to unveil the much-anticipated GeForce RTX 5000 series of graphics cards, provide an update on Blackwell GPU shipments, and display other innovations at the event.
Conclusion:
Investors are shaking off the failed Santa Claus rally and are now focusing on optimism under "Trump 2.0."
However, the looming risk of higher-for-longer interest rates, tariff uncertainties, and geopolitical risks are prompting some investors to focus on risk-off assets, such as bonds.
I remain constructive on the US equity market in 2025 and reckon that tech-related sectors may outperform other sectors due to the AI boom.
I remain constructive on tech-related stocks and ETFs, such as the Magnificent Seven, $VanEck Semiconductor ETF(SMH)$ , $Taiwan Semiconductor Manufacturing(TSM)$ , $Broadcom(AVGO)$ , $ARM Holdings(ARM)$ , $Advanced Micro Devices(AMD)$ , and $Oracle(ORCL)$ .
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