U.S. equity futures experienced an upward trend on Wednesday, primarily driven by the tech-heavy Nasdaq. This rise was influenced by several factors, including President Donald Trump's announcement of a $500 billion "Stargate" initiative aimed at enhancing U.S. artificial intelligence (AI) capabilities. This initiative involves major companies such as Microsoft-backed OpenAI, Oracle, and SoftBank. As a result, Oracle's shares increased by 9%, while other tech companies like Microsoft and Nvidia also saw gains. The goal is clear: to establish the United States as the epicenter of global AI
Netflix significantly contributed to the Nasdaq's rise, with its shares jumping 14.9% in premarket trading. The streaming giant reported a record number of subscribers in the holiday quarter, allowing it to raise prices for most service plans. This positive performance also boosted other streaming companies.
Globally, markets in China and Hong Kong declined after President Trump reiterated a threat to impose an additional 10% tariff on Chinese goods. This announcement also affected the broader market sentiment, with concerns about potential trade wars and inflation pressures. President Trump is also pushing for an early renegotiation of the U.S. trade deal with Canada and Mexico, using the threat of tariffs as leverage.
In the short term, the financial markets appear unfazed by the unfolding political landscape. Most Western stock indices climbed yesterday, with the S&P 500 nearing its record high from December 6, 2024. Meanwhile, Apple continued its downward trajectory, shedding 3.2% and extending its one-month decline to 12.5%. As a result, Apple has once again ceded its title as the world's largest company by market capitalization to Nvidia.
Tech moguls are often seen as omnipotent, yet even they seem to regard Donald Trump as the ultimate power broker. Despite differing views, many tech leaders have pledged their allegiance to the new President, eager to be in his good graces at the inauguration. Trump also reminded us that he hasn't forgotten about China and Europe when it comes to tariffs, though his approach is less aggressive than towards Mexico and Canada. As expected, the dawn of 2025 heralds a transformation of the United States under Trump, and consequently, a reshaping of the world. For decades, when the United States speaks, others listen. This dynamic will have significant repercussions in the coming months and years. Even as the rest of the world attempts to regain control, the U.S.'s technological leadership and its ability to mobilize vast investments give it a substantial advantage. Wall Street's ability to attract global savings is another key asset. This "America First" policy, or rather "All for America, regardless of the rest of the world," is not without risks—economic, geopolitical, societal—but in the short term, it's a formidable force.
So, what are the world's top fund managers doing about it? That's the focus of Bank of America's monthly survey, which landed on my desk yesterday. Frankly, the U.S. bank could have skipped January's edition, as the results are as predictable as rain in Brittany. Drum roll... Professionals are buying dollars, stocks, and bitcoins while selling almost everything else. That's a bit of an oversimplification, as there are some intriguing nuances. For instance, managers have increased their bets on Europe at the expense of the United States, albeit modestly. Specifically, they've shifted to a symbolic overweight in Europe, having been 22% underweight the previous month (quick explanation: overweight and underweight refer to positions more or less exposed to the index average.
For example, if Europe makes up 14% of global indices and managers are 11% exposed to Europe, they're 3% underweight, indicating they believe other regions will perform better). Simultaneously, managers have reduced their overweight in U.S. equities from 36% to 19%. I'm being a tad dramatic: the shift is still one of the most significant in the past 25 years. Whether it will endure is another question.
And here's the burning question: what keeps the anxious investor up at night? The fear that inflation will compel the Fed to hike rates. The nightmare scenario? A sudden spike in bond yields wiping out equities. The safe haven? Staying long on the magnificent seven (as has been the case for 22 consecutive months). The favored index? The Nasdaq, once again, while the Russell 2000 has rapidly dwindled.
In the Asia-Pacific region this morning, markets are caught between renewed enthusiasm for artificial intelligence, boosting semiconductor stocks, and the looming threat of tariffs on China, even though Trump's proposed 10% figure is below economists' median expectations (closer to 20%). Japan rebounded 1.5% despite the prospect of a rate hike by the Bank of Japan on Friday. China fell 1% on the mainland and 1.6% in Hong Kong. South Korea and Taiwan, with their substantial tech sectors, gained 1%. The situation is more complex in India, where the SENSEX limited its gains to 0.2%. Australia rose 0.3%. In Europe, indices are bullish, with the Stoxx Europe 600 up 07%.
Today's economic highlights:
Dollar: EUR 0.9581 GBP 0.8093
Ounce of gold: USD 2758
Brent crude: USD 78.69 WTI: USD 75.89
10-year US bond: 4.58
Bitcoin: USD 105,000
In corporate news:
- Netflix soars 14% after its quarterly results.
- Johnson & Johnson reported fourth-quarter sales and profits that exceeded Wall Street estimates, driven by strong sales of cancer treatments.
- United Airlines gains 3.6% after its quarterly results.
- Donald Trump announced an AI infrastructure program called “Stargate”, involving investments of at least $500 billion, in which Oracle, Softbank and OpenAI will participate.
- Google invests a further $1 billion in Anthropic, according to the FT.
- GE Vernova's shares fell 2.1% after missing revenue estimates for the same period.
- Halliburton's shares rose by 1.2% following better-than-expected fourth-quarter profits, supported by increased demand for oilfield services and equipment.
- Southwest Airlines cuts 270 pilot positions in Denver and Atlanta to reduce costs.
- Masimo appoints Katie Szyman CEO.
- L3Harris Technologies receives a $263 million order from the US Army.
Today's main earnings reports: Procter & Gamble, Johnson & Johnson, Abbott Laboratories, GE Vernova, Amphenol, Kinder Morgan, The Travelers, Crown Castle, Discover Financial, TE Connectivity, Las Vegas Sands, Halliburton...
Analyst recommendations:
- 3M Company: Wells Fargo upgrades to overweight from equalweight with a price target raised from USD 140 to USD 170.
- Darden Restaurants, Inc.: Bernstein upgrades to outperform from market perform and raises the target price from USD 180 to USD 215.
- Garmin Ltd.: Zacks downgrades to neutral from outperform with a price target reduced from USD 243 to USD 226.
- Intra-Cellular Therapies, Inc.: RBC Capital upgrades to sector perform from outperform with a price target raised from USD 108 to USD 132.
- Nordson Corporation: Loop Capital Markets upgrades to buy from hold with a price target raised from USD 255 to USD 280.
- Seagate Technology Holdings Plc: Summit Insights Group LLC upgrades to buy from hold.
- Truist Financial Corporation: Baptista Research downgrades to underperform from hold with a target price raised from USD 31.10 to USD 52.30.
- Yum! Brands, Inc.: Bernstein downgrades to market perform from outperform with a target price reduced from USD 140 to USD 135.
- Aes Corporation (The): Evercore ISI maintains its outperform recommendation and reduces the target price from USD 23 to USD 15.
- Ftai Aviation Ltd.: Stifel maintains its buy recommendation and reduces the target price from USD 167 to USD 100.
- Lattice Semiconductor Corporation: KeyBanc Capital Markets maintains its overweight recommendation and raises the target price from USD 54 to USD 70.
- Netflix, Inc.: Canaccord Genuity upgrades to buy from hold with a price target raised from USD 940 to USD 1150.
- Silicon Laboratories Inc.: KeyBanc Capital Markets maintains its overweight recommendation and raises the target price from USD 115 to USD 160.
- Tesla, Inc.: Fubon Securities maintains its buy recommendation and raises the target price from USD 472 to USD 1000.
- Tractor Supply Company: Piper Sandler & Co maintains its overweight recommendation and reduces the target price from 326 to USD 65.
- United Airlines Holdings, Inc.: Raymond James maintains its outperform rating and raises the target price from USD 90 to USD 120.
- AVIVA PLC: JP Morgan upgrades to overweight from neutral with a target price raised from GBP 5.55 to GBP 6.15.
- Big Yellow Group Plc: Berenberg upgrades to buy from hold with a target price reduced from GBX 1285 to GBX 1144.
- Halma Plc: Berenberg upgrades to buy from hold with a target price raised from GBX 2700 to GBX 3250.
- Bank Of Montreal: Baptista Research upgrades to buy from hold with a price target raised from USD 100.70 to USD 118.