U.S. Stocks Close Higher, Dow Rises 168 Points, Tech Earnings in Focus
As of early morning on January 31, U.S. stocks closed higher on Thursday, with the Dow rising 168.61 points, or 0.38%, to 44,882.13. The Nasdaq increased by 49.43 points, or 0.25%, finishing at 19,681.75; the S&P 500 went up 31.86 points, or 0.53%, closing at 6,071.17. The market is primarily focused on the latest earnings from major tech companies and the Federal Reserve's monetary policy decisions.
Tech Giants Release Earnings
This week, tech companies are releasing their earnings in quick succession. Meta Platforms, Tesla, and Microsoft released their reports on Thursday. Art Hogan, Chief Market Strategist at B. Riley Wealth Management, noted that the overall earnings of these three tech companies are good, with many outperforming expectations in revenue and profits. Earnings from Apple and Amazon are anticipated on Thursday and next week respectively, and the market continues to watch closely.
Tesla's revenue for the fourth quarter was $25.707 billion, up 2% year-over-year, although its annual performance fell short of Wall Street expectations. Microsoft's stock fell due to Azure cloud services growing slower than anticipated. IBM reported better than expected full-year revenue guidance, causing its stock to surge nearly 13%.
Federal Reserve Keeps Rates Unchanged, Adjusts Inflation Language
Investors are digesting the Federal Reserve's latest monetary policy decision. The Federal Reserve announced on Wednesday it would keep the federal funds rate unchanged at 4.25% to 4.5% and adjusted its statement on inflation. Instead of "making progress towards a 2% target," it now states "inflation remains elevated," suggesting no rush to cut rates in the near term.
Federal Reserve Chairman Powell emphasized during a press conference that policy remains accommodative with no rush to adjust rates. He noted that inflation is nearing the goal but remains high, and the Fed's benchmark rate is well above the long-term neutral level, indicating there's room for future cuts.
Economists analyze that potential fiscal, trade, and immigration policies from the Trump administration could increase inflationary pressures, with markets expecting economic growth to slow in the second half of the year. Renowned investor Gundlach believes the Fed will not cut rates in the short term, with little chance of a significant drop in inflation over the coming months.
U.S. GDP Growth Slows, Unemployment Claims Improve
The latest data from the U.S. Commerce Department shows GDP growth of 2.3% in the fourth quarter of 2023, below market expectations, with previous quarter growth revised to 3.1%. Personal consumption grew 4.2%, slightly exceeding the 3.7% of the previous quarter.
The Labor Department reported that initial unemployment claims fell by 16,000 to 207,000 last week, below market expectations, indicating a still robust labor market. Continuing claims dropped to 1.858 million.
European Central Bank Cuts Rates for Fifth Time, Maintains Easy Stance
The European Central Bank announced its fifth rate cut since June of last year, lowering the deposit rate by 25 basis points to 2.75%, in line with market expectations. The bank stated that although economic growth remains hampered, demand is expected to gradually pick up as inflation declines and income rises. Officials emphasized that the current monetary policy remains "restrictive," suggesting possible further rate cuts.
Nvidia's Chip Sales to China May Be Restricted
Markets are focusing on Nvidia's export of AI chips to China. Reports suggest that Trump administration officials are considering expanding sales restrictions, potentially involving the H20 chip. This chip, specially for the Chinese market, has been downgraded to comply with U.S. export control requirements. If related policies are further tightened, it could escalate tensions in the US-China tech sector and impact Nvidia's market performance in China.
A Nvidia spokesperson stated the company will continue to work with the U.S. government. Analysts believe ongoing export controls may prompt China to accelerate its technological self-reliance efforts, weakening U.S. companies' competitiveness in the global market.
Markets Focused on Future Policy Directions
U.S. stock investors are closely monitoring future monetary policies and global economic trends. While the Federal Reserve is not in a hurry to cut rates in the short term, market expectations remain divided on a rate cut this year. The European Central Bank's rate cuts may drive a global easing trend, and the performance of tech stock earnings will continue to influence market sentiment.
