January 28, 2025

Markets:

S&P 500 futures inched higher early Tuesday, following a sell-off fueled by worries over the emergence of Chinese startup DeepSeek and its greater implications for the artificial intelligence trade.

Futures were trading in step with Nvidia in the premarket, with both trading off their highs during the session. Nvidia added more than 2% after suffering a nearly 17% decline on Monday, which resulted in a market cap loss of nearly $600 billion — the biggest one-day drop for a U.S. company in history. Broadcom and Oracle also traded higher by more than 3% and around 1%, respectively.

Concerns over DeepSeek came to a head on Monday, with the Nasdaq Composite losing more than 3%, while the S&P 500 slid about 1.5%. The Chinese startup last month unveiled a free open-source large language model that it says took less than $6 million to build. The development spurred worries around Big Tech’s investment into AI. DeepSeek surpassed rival OpenAI on Monday to become the most-downloaded free app in the U.S. on Apple’s App Store.

Investors’ attention is turning toward corporate earnings due this week. Starbucks is due to report Tuesday after the bell. A slate of Magnificent Seven companies will report in the coming days, with Meta Platforms, Microsoft, Tesla and Apple due later this week.

The Federal Reserve will also kick off its two-day policy meeting on Tuesday. Fed funds futures are pricing in a more than 99% chance that interest rates will remain unchanged, according to CMEGroup’s FedWatch Tool. Inflation data out Friday will give investors further insight on the health of the U.S. economy.

Portfolio:

What a Monday of absolutely chaos. One of the best and well-respected individuals on Wall Street Tom Lee stated this is the worst market overreaction since 2020 pandemic outbreak. As we stated in yesterday's pre-market, we obviously agree. The higher powers are always looking for narratives to swing prices and to enter at cheaper rates. This is known. We have a monster week ahead with earnings, FOMC, and data points to come. Like the carry trade event, we think yesterday printed the short term low and we build from here. At one point Naz was down about 900 points – insane!

We will look to begin to reenter stops shortly with updates. We enter today session holding setups in RR, HOOD, AAPU, and KODK. We will be watching price / flow carefully early on and should begin to once again see positioning ahead of these monster earning reports to come over the next few sessions.

Again, be mindful of false narratives and getting caught up in noise and daily movement. The overall trend is still super bullish and in a major Bull cycle. That has not been broken! The next few days will easily set the stage of the next month or so. Be patient here!