U.S. Stock Outlook | U.S. GDP and employment data released, Apple and Intel earnings reports coming after the market closes

Pre-Market Market Trends

1. As of January 30 (Thursday) pre-market, U.S. stock index futures are all up. At the time of publication, Dow futures are up 0.22%, S&P 500 futures are up 0.36%, and Nasdaq futures are up 0.59%. Yesterday, Tesla, Microsoft, and Meta announced their fourth-quarter results and held a conference call. In pre-market trading, major tech giants showed mixed results: Tesla is up 1.75%, Meta is up 1.31%, Microsoft is down 4.06%, Nvidia is down 0.4%, and Broadcom is up nearly 5%.

1. As of publication, Germany's DAX index is up 0.41%, the UK's FTSE 100 index is up 0.34%, France's CAC 40 index is up 0.54%, and the Europe Stoxx 50 index is up 0.80%.

1. As of publication, WTI crude oil is up 0.14%, priced at $72.72 per barrel. Brent crude oil is up 0.15%, priced at $75.72 per barrel.

Market News

"New Federal Reserve News Agency": Inflation and growth are uncertain, the Federal Reserve enters a "wait and see" mode. Wall Street Journal reporter Nick Timiraos pointed out that the Federal Reserve has paused its consecutive rate cuts and entered a wait-and-see phase to assess whether further rate reductions are necessary. On Wednesday, the Federal Reserve paused rate cuts, maintaining the benchmark federal funds rate at around 4.3%, a significant decrease from 5.3% in September last year. Federal Reserve Chairman Jerome Powell stated at a press conference that due to the current level of interest rates being more relaxed than last year, there is "no rush to adjust the policy stance." Timiraos indicated that this statement suggests the Federal Reserve may not take new actions at the March meeting, and whether further rate cuts will occur will depend on actual inflation progress or unexpected weakness in the labor market.

Microsoft CEO: DeepSeek has "real innovation," now accessible via Microsoft Cloud, AI cost reduction is a trend. Microsoft CEO Satya Nadella emphasized during the conference call that the DeepSeek R1 model is currently available through Microsoft's AI platform Azure AI Foundry and GitHub, and will soon be able to run on Copilot+ computers. Nadella described DeepSeek as having "some real innovations," and noted that the trend is a reduction in AI costs: "The Scaling Law continues to accumulate in pre-training and inference time calculations. Over the years, we have seen significant improvements in the efficiency of AI training and inference In terms of reasoning, we usually see the cost-performance ratio of each generation of hardware increase by more than 2 times, and the cost-performance ratio of each generation of models increase by more than 10 times."

As DeepSeek impacts the US stock market, reports suggest SoftBank is negotiating to invest up to $25 billion in OpenAI. According to reports, Japan's SoftBank Group is in talks to invest up to $25 billion in OpenAI, which could make SoftBank the largest supporter of this artificial intelligence startup. The deal has not yet been finalized. This would be an investment beyond the $15 billion commitment SoftBank made to the Star Gate project. Reports indicate that SoftBank founder Masayoshi Son has been insisting on increasing his stake in the startup after investing $500 million in OpenAI's previous funding round. OpenAI is transitioning to a for-profit enterprise, which means it needs more funding and computing power to compete in the artificial intelligence arms race.

DeepSeek disrupts the AI circle, with giants like Microsoft and Meta stating "no impact" and "the technology is not more advanced." Microsoft CEO Satya Nadella and Meta CEO Mark Zuckerberg defended their companies' large-scale AI investments during earnings calls, with Nadella stating that the large investments are aimed at overcoming capacity bottlenecks that hinder Microsoft's AI business development, and that improvements in AI efficiency will lead to exponential demand growth; Zuckerberg emphasized that sustained large-scale AI investments will become a long-term strategic advantage. Additionally, both Microsoft and Meta highlighted the importance of reasoning, while Nvidia's GPU chips are primarily used for training. Meanwhile, the two major AI giants in the US, Anthropic and OpenAI, quickly responded, with Anthropic CEO Dario Amodei stating that the reduced training costs of DeepSeek align with industry trends and do not represent a breakthrough in technological achievements.

OPEC+ prepares to unite against Trump, Saudi Energy Minister "privately meets" with several counterparts. Kazakhstan stated on Wednesday that the OPEC+ group, composed of major oil-producing countries, will discuss US President Trump's efforts to increase US oil production and take a united stance on the matter. Trump called on Saudi Arabia and OPEC to lower oil prices last week. OPEC+ has not yet responded, but five OPEC+ representatives indicated that the OPEC+ Joint Ministerial Monitoring Committee meeting scheduled for February 3 is unlikely to adjust its current plans to increase production starting in April. Two others stated that it is too early to draw conclusions.

Individual Stock News

Undeterred by Q4 profits falling short of expectations! Tesla (TSLA.US) guidance ignites optimism. Tesla announced its fourth-quarter earnings on Wednesday Eastern Time, and after a challenging 2024, Tesla expects its vehicle sales to rise this year, offsetting the impact of last year's fourth-quarter profits falling short of expectations, with the stock rising in after-hours trading. The earnings report showed that Tesla's adjusted earnings per share for the fourth quarter were $0.73, below the average analyst expectation of $0.75. However, the electric vehicle manufacturer pointed out that advancements in automotive autonomous driving technology and new model plans will drive the company to "return to growth in 2025." Tesla also predicted that profits from artificial intelligence, software, and the fleet will accelerate growth. This outlook alleviated concerns about the electric vehicle market Microsoft (MSFT.US) Q2 revenue and EPS exceed expectations, cloud computing growth expected to slow, massive AI investments questioned. After the U.S. stock market closed on Wednesday, Microsoft (MSFT.US) announced its second-quarter results for the fiscal year 2025. The company reported total revenue of $69.6 billion, a 12% year-over-year increase, better than the market expectation of $68.9 billion; earnings per share were $3.23, also exceeding the market expectation of $3.12. Microsoft stated that the Azure cloud division had a 13 percentage point growth in the second fiscal quarter attributed to artificial intelligence, compared to 12 percentage points in the first quarter. The AI revenue for the quarter corresponds to an annualized level of $13 billion. Due to the company's difficulty in establishing enough data centers to meet the demand for AI products, growth in its cloud computing business is expected to continue to slow in the current quarter. Microsoft anticipates that the growth rate for Azure in the third fiscal quarter will be at most 32%, not much faster than the growth rate in the last three months of 2024.

Weak demand for storage chips, Western Digital (WDC.US) Q2 results and guidance disappointing, spin-off plan under scrutiny. After the U.S. stock market closed on Wednesday, data storage product manufacturer Western Digital announced its second-quarter results for the fiscal year 2025. The company reported Q2 revenue of $4.29 billion, above the market expectation of $4.26 billion; adjusted earnings per share were $1.77, slightly below the market expectation of $1.78. However, Western Digital's guidance for third-quarter revenue fell short of Wall Street expectations, as the company anticipates a decline in demand from cloud computing and enterprise customers. High borrowing costs and economic uncertainty have forced companies to cut back on investments, severely impacting demand for storage chips and hurting companies like Western Digital. Additionally, Western Digital announced the latest progress on its plan to split into two independently listed companies, one focusing on hard disk business and the other on flash memory business.

Strong demand for AI products, "Blue Giant" IBM (IBM.US) Q4 results and guidance exceed expectations. After the U.S. stock market closed on Wednesday, "Blue Giant" IBM Corp announced its fourth-quarter results for the fiscal year 2024. The data showed that the company's Q4 total revenue grew by 1% year-over-year to $17.6 billion, exceeding the market expectation of $17.5 billion; adjusted earnings per share were $3.92, better than the market expectation of $3.74. The software division is IBM's largest and fastest-growing segment, with Q4 revenue increasing by 10% to $7.92 billion. The expansion of the software business benefited from a 16% growth in Red Hat's business, which IBM acquired in 2019. IBM's consulting division has seen revenue decline for the fourth consecutive quarter, down to $5.18 billion. Chief Financial Officer Jim Kavanaugh stated that clients continue to shift funding from traditional consulting projects to AI-focused projects. Notably, IBM expects strong revenue growth in the new fiscal year, with a significant increase in AI-related orders.

Legal fees and restructuring costs erode profits, Deutsche Bank (DB.US) Q4 and fiscal year 2024 results below expectations, abandons 2025 cost targets. Deutsche Bank announced its fourth-quarter financial report and fiscal year 2024 results before the market opened on Thursday Eastern Time, as legal litigation costs and restructuring expenses eroded revenue growth in its global investment banking division, resulting in profits falling short of expectations Data shows that Deutsche Bank's revenue in the fourth quarter reached €7.224 billion, exceeding the LSEG analyst forecast of €7.125 billion. However, during this period, the company incurred a loss of €594 million due to litigation costs. The Q4 net profit attributable to shareholders was €106 million (approximately $110.43 million), down from €1.26 billion in the same period last year and below the analyst expectation of about €380 million in profit. Deutsche Bank also abandoned a key cost target, with the current cost-to-income ratio target being below 65%, compared to the previous plan of below 62.5%. Despite the quarterly profit decline, Deutsche Bank initiated a €750 million stock repurchase plan.

Multiple headwinds "surrounding" Shell (SHEL.US)! Q4 and annual profits fell short of expectations, announcing a $3.5 billion stock buyback to "rescue the situation." Oil giant Shell (SHEL.US) announced its fourth-quarter earnings and fiscal year 2024 performance report before the market opened on Thursday Eastern Time. The data showed that the adjusted net profit for the fourth quarter was $3.66 billion, down from $7.31 billion in the same period last year and below the analyst expectation of $4.09 billion surveyed by Vara Research, mainly due to declining refining margins, poor liquefied natural gas (LNG) trading performance, and weak oil prices. The company also stated it would repurchase $3.5 billion worth of stock and announced a 4% increase in dividends.

Sanofi (SNY.US) Q4 earnings exceeded expectations, strong EPS guidance for fiscal year 2025, plans to repurchase €5 billion in stock. French pharmaceutical company Sanofi (SNY.US) announced its fourth-quarter earnings before the market opened on Thursday Eastern Time, with earnings meeting analyst expectations. The data showed that, at constant exchange rates (CER), Q4 revenue grew by 10.3% to €10.56 billion, with an earnings per share (EPS) of €1.31 and an IFRS EPS of €0.54. Additionally, the company announced it would repurchase €5 billion ($5.21 billion) in stock this year to build investor confidence in its pharmaceutical product line and accelerate profit growth. At constant exchange rates, the EPS growth rate by 2025, excluding certain items, could reach 11%-14%, compared to last year's increase of 4.1%.

Important Economic Data and Event Forecast:

Beijing time 21:30: Initial jobless claims in the U.S. for the week ending January 25 (10,000), U.S. Q4 real GDP annualized quarterly rate preliminary value, U.S. Q4 real personal consumption expenditures quarterly rate preliminary value, U.S. Q4 core PCE price index annualized quarterly rate preliminary value.

Beijing time 23:00: U.S. December existing home sales index month-on-month.

Beijing time 23:30: U.S. EIA natural gas inventory for the week ending January 24 (billion cubic feet).

Earnings Forecast:

After Thursday's market close: Apple (AAPL.US), Intel (INTC.US), Visa (V.US), U.S. Steel (X.US).

Before Friday's market open: ExxonMobil (XOM.US), Chevron (CVX.US)