Weekly Market Recap (Jan 27-31): Markets Partially Recover From The DeepSeek Shakeout - A False Alarm or the Start of Something Bigger?
Everything you need to know about last week's markets performance and what to expect next.
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Friday means it's time to review the week in the markets. Each week, I dedicate hours to curating this market recap, preparing insightful analysis with clear visuals and a structured layout—making it easy for you to find exactly what you need, week after week. And because it's easy to get swayed by personal bias, I like to let the data do most of the talking.
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SUMMARY
Here are this week's highlights and what to look out for next:
1. The markets were negative this week, with the S&P 500 down -1%, the Nasdaq down -1.6%, and the Dow Jones up 0.3%. Communication Serv. (+2.0%) and Health Care (+1.8%) were the best-performing sectors.
2. The S&P 500's long-term trend is positive, and so is the short-term momentum. 6,130 is the next resistance, while 6,000 is support.
3. The Q4 earnings season is well under way and 178 companies from the S&P 500 index have released their quarterly results, with 75% beating estimates. Earnings are expected to be up 12% in Q4 2024 and 13% in 2025.
4. Market sentiment is at the "Neutral" level (47) as measured by CNN’s Fear & Greed indicator, while VIX is at a low value of 16.
5. Earnings reports from Amazon and Alphabet, and the latest Job report are scheduled for next week.
My take:
I was cautious heading into the week, as the market had been running a little too hot, and I expected the Fed meeting or tech earnings to shake things up. Ultimately, as is often the case, the real shakeout came from something else entirely—a sell-off in AI stocks triggered by DeepSeek’s report. While Monday’s early price action looked concerning, the markets somehow rebounded but still finished the week down. The impact on AI stocks, particularly Nvidia, could have longer-lasting effects.
Next week will bring more earnings and economic reports, while we continue to navigate the first weeks of Trump’s presidency. And if momentum remains mostly positive, both short and long term, the past few days have served as a good reminder that the ride is unlikely to be smooth in 2025.
PERFORMANCE RECAP
1. S&P 500 Sector Performance
This week, 5 out of the 11 S&P 500 sectors posted gains. Communication Serv. led the market with a 2% increase, while Energy was the laggard, dropping 4%.
Year-to-date, 10 sectors have achieved positive performance. Health Care is the top-performing sector with a 6.8 % gain, while Technology lags behind, with a 0.7 % loss.
2. S&P 500 Top & Worst Performers
Over the last five trading days, 54% of the stocks in the S&P 500 index rose in value.
Top Performers:
$RCL (Royal Caribbean Group): 14.9%
$IBM (International Business Machines Corp): 13.8%
$BEN (Franklin Resources, Inc): 10.7%
$NCLH (Norwegian Cruise Line Holdings Ltd): 10.4%
$IVZ (Invesco Ltd): 9.1%
Worst Performers:
$CEG (Constellation Energy Corporation): -13.7%
$PWR (Quanta Services, Inc): -14.1%
$UPS (United Parcel Service, Inc): -14.1%
$SMCI (Super Micro Computer Inc): -14.3%
$NVDA (NVIDIA Corp): -15.8%
In addition, 71 stocks within the S&P 500 reached a new 52-week high, while 16 stocks set new lows. The majority of this week’s highs came from the Financials sector.
Notable Highs:
$AMZN (Amazon.com Inc)
$META (Meta Platforms Inc)
$WMT (Walmart Inc)
$JPM (JPMorgan Chase & Co)
$V (Visa Inc)
Notable Lows:
$AMD (Advanced Micro Devices Inc)
$DHR (Danaher Corp)
$CMCSA (Comcast Corp)
$UPS (United Parcel Service, Inc)
$GD (General Dynamics Corp)
MARKET MOMENTUM
1. Momentum Review
To evaluate the market's current health, I examine 4 key elements: performance, breadth, trends, and key levels. Healthy bull markets typically feature indices setting new highs, broad market participation, and ascending trend lines.
Performance (POSITIVE 🟢): evaluating recent market performance to gauge the momentum’s strength. Ideally i want to see returns accelerating short-term and index trading less than 5% from its 1-year high
1-month performance: +2.3% 🟢
3-month performance: +3.4% 🟢
vs. 1-year high: -1.5% 🟢
Breadth (SOLID 🟢): assessing market participation to understand the robustness of the trend. Extreme levels (above 80% or below 20%) may indicate overextended trends.
% of stocks above 200-day moving average: 59% (down from 60% last week) 🟢
% of stocks above 20-day moving average: 69% (down from 79% last week) 🟢
Trends: analyzing trend strength across multiple timeframes using exponential moving averages, scored on a scale of 1 to 5. A score of 3 or above suggests solid trends and supports holding a position.
Weekly chart: STRONG ⭐️⭐️⭐️⭐️⭐️
Daily chart: SOLID⭐️⭐️⭐️⭐️
4-hour chart: MODERATE ⭐️⭐️⭐️
Key levels: identifying critical price zones to confirm the current trend or signal a potential reversal.
Support:
$6,000 (-0.7%)
$5,960 (-1.3%)
$5,900 (-2.3%)
Resistance:
$6,130 (+1.5%)
$6,250 (+3.5%)
$6,370 (+5.5%)
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2. Post of the Week
This week's momentum analysis is about seasonality, as we started the month of February. Over the past 20 years, the S&P 500 has had a flat average performance in February, with a win rate of 54%.
EARNINGS & ECONOMIC REPORTS RECAP
1. Earnings Outlook
Q4 Earnings: S&P 500 earnings are expected to grow by 12%, rising to 15% when excluding the energy sector.
2025 Full-Year Outlook: Earnings are expected to increase by 13%, above the 10-year average growth of 9%.
Analyst Revisions: Over the past month, 44% of all earnings revisions by analysts have been upward adjustments to their outlook.
Valuation: The forward 4-quarter P/E ratio stands at 22.3, above the 5-year and 10-year historical averages.
2. Earnings Season Recap
Out of 178 S&P 500 companies that have reported fourth-quarter earnings, 75% exceeded EPS expectations. It is below with the four-quarter average of 78% but above the historical average of 67%.
Below are some notable companies that reported earnings last week. I’ve highlighted their EPS and revenue performance vs estimate, as well as their stock return this week.
Notably, Meta Platforms was a standout performer, beating both earnings and Revenue expectations, while the stock returned 6.4% last week.
3. Economic Reports
Here's the highlight for last week's key economic reports:
FOMC Meeting (January 29): The Federal Reserve left interest rates unchanged at 4.50%, as widely expected, signaling a continued wait-and-see approach while monitoring inflation and economic data.
Core PCE Price Index - Year-over-Year - (Jan 31): The Fed's preferred measure of inflation came in at 2.8%, matching expectations.
MARKET SENTIMENT
Measures of investor sentiment can be helpful as they provide insight into the views and opinions of professional or individual investors. While not definitive predictors of market direction, these measures can serve as a valuable complement to other indicators and analysis tools, helping to paint a more comprehensive picture of the market's current state.
1. AAII Sentiment Survey (Individual Investors)
The American Association of Individual Investors (AAII) conducts a weekly survey to gauge members' expectations for the stock market over the next six months. Results are published every Wednesday.
In the latest survey, 41% of respondents had a bullish outlook, down from 43% the previous week.
2. BofA Bull & Bear Indicator (Institutional Investors)
The Bank of America Bull-Bear Indicator measures investor sentiment based on fund managers' and institutional investors' views. Scores range from 0 (extremely bearish) to 10 (extremely bullish).
The most recent reading was 4.2, a neutral sentiment.
3. CNN Fear & Greed Index (Technical)
This daily measure analyzes seven indicators to assess how emotions drive market decisions. Scores range from Extreme Fear to Extreme Greed.
The index closed at 47 (Neutral), down from 48 last Friday.
THE WEEK AHEAD
1. Economic Calendar
The spotlight for the week will be on Friday's labor market data, which includes:
Nonfarm Payrolls (January): A key indicator of job market strength, with 256K jobs added in the previous reading.
Unemployment Rate (January): Providing insights into labor market conditions.
Average Hourly Earnings (MoM - January): A critical measure of wage inflation.
These reports will provide valuable insights into the U.S. labor market and will certainly move the market as well as influence the Fed next move.
2. Earnings Calendar
Earnings season continues next week, and 128 companies from the S&P 500, including Amazon and Alphabet, are expected to release their quarterly results.
Below are notable stocks reporting earnings next week, along with several key indicators I like to monitor:
Stock Indicators:
3-Month Performance: Assessing recent stock trends.
RSI (Relative Strength Index): A reading above 70 suggests overbought conditions, while below 30 indicates oversold.
P/E Ratio: A value below 25 often points to a "cheap" valuation or low growth expectations.
Stock Price Reactions to Earnings:
1-Day Stock Return on Earnings: How the stock performs on its earnings release day.
Implied Volatility: The options market's forecast for the expected 1-day stock move after earnings.
Palantir is coming in hot, up an impressive 84% over the past three months. Its current valuation is a concern, reflecting sky-high investor expectations. With implied volatility forecasting a +/-15% move next week, all eyes are on whether Palantir can deliver against the expectations. It’s set to be a good ride!
3. Stock Analysis of the Week
Every week, I share my analysis of 1 stock reporting earnings in the coming days, focusing on implications for long-term investors. This week, I prepared an analysis of Alphabet ($GOOG).
👨💻 My View: HOLD
Alphabet has been in a strong uptrend, although it hasn’t always been a smooth ride. The stock has just broke above the $200 psychological resistance, a critical level that has investors wondering whether the rally can continue.
Momentum indicators remain supportive, and the 9-week EMA has stayed consistently above the 30-week EMA, confirming the long-term bullish trend.
Sustaining the breakout above $200 could pave the way for the next leg higher. However, failure to maintain above could signal consolidation or a short-term pullback.
Check out the post for more details about $GOOG performance, trend and key levels.
4. Subscribers Poll: Alphabet
CONCLUSION
Thank you for reading my Weekly Market Recap, which, I hope, got you ready for the week ahead.
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Thanks again, and I look forward to sharing my market recap with you next week.
Happy investing!
My Weekly Stock
DISCLAIMER
The information provided in this newsletter is for informational purposes only and should not be taken as financial advice. Any investments or decisions made based on the information provided in this newsletter are the reader's sole responsibility. We recommend that readers conduct their own research and consult a qualified financial professional before making investment decisions. The author does not assume any responsibility for any losses or damages arising from using the information provided in this newsletter.
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