U.S. Stocks Lower on Corporate Earnings and AI Competition Fears

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Main Content:

1.    Major indexes weekly performance 

2.    U.S stocks weekly wrap 

3.    S&P 500 sector index weekly/month performance 

4.    China/Hong Kong stocks weekly wrap 

5.    Singapore stocks weekly wrap 

6.    Major indexes weekly chart and technical support & resistance levels

U.S.

For the week of Jan 31, major stock indexes finished the volatile week mostly lower, although the Dow Jones Industrial Average rose modestly to notch its third straight week of gains. The technology-oriented Nasdaq Composite(COMP) experienced a particularly steep drop on Monday, driven by a sell-off in tech stocks in response to the emergence of DeepSeek, a Chinese artificial intelligence (AI) developer. Refer to below major indexes performance table for the week and the month of January.

Index monthly performance for the month of Januanry:

Key highlights for the week and next:

1.    U.S. economy remains solid, Q4 GDP grows 2.3% annualized. Consumer spending, representing about 68% of the economy, was the main driver of the expansion, rising at a 4.2% annualized rate, the highest reading since the first quarter of 2023. For the year, real GDP grew by 2.8% in 2024, down from 2.9% in 2023. 

2.    Earnings Report: Four of the Magnificent 7 companies reported in the week.  Apple(AAPL), Microsoft(MSFT) and Meta(META) delivered strong results, above estimates for both earnings per share and revenue, while Tesla(TSLA) missed on both measures. Despite disappointing results, Tesla shares traded higher on optimism over the favorable regulatory environment, new more affordable models, and autonomous vehicles, including Robotaxi. 

3.    Interest rate. The Fed’s FOMC meeting this week, decided to hold rate steady, maintaining its target interest rate range at 4.25% to 4.5%, as expected. Core personal consumption expenditure (PCE) - the Fed's preferred inflation gauge – has moderated to 2.8% from the 2022 peak of more than 5% but remains above the 2% target, and the pace of disinflation has slowed. With the fed funds rate currently around 4.35% and a neutral rate generally about 1% above inflation, monetary policy likely remains restrictive. 

4.    Technology stocks are down this week but have rebounded from Monday’s sharp sell-off that was sparked by Chinese AI startup DeepSeek. The company's AI model reportedly performs comparably to those of leading U.S. technology companies, despite being developed at a fraction of the cost and requiring less computing power. 

5.    Tariffs risks continue to loom: President Donald Trump reiterated his plan to impose 25% tariffs on Mexico and Canada, the U.S.’s top two trading partners, by February 1, while also threatening to levy an additional 10% tariff on goods from China. This comes after the prior week’s comments from the president, which seemed to give investors hope that he would take a softer-than-anticipated stance on global tariffs.

 

SPX sectors in play

Five out of the 11 SPX sectors recorded weekly gain. Communication Services(XLC) and Health Care(XLV) outperformed while Technology(XLK) and Energy(XLE) lagged. DeepSeek released a new open-source large language model that reportedly requires much less energy and processing power than other leading AI applications, leading to competitive concerns in the broader AI space. The news led to shares of NVIDIA falling nearly 17% on Monday. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

Both the SPX and COMP indexes closed 1^st week lower after two-week up streak, while DJI continues to record its 3^rd weekly gain. All three weekly chart uptrend well intact. Click below three indexes for their weekly charts.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China stock markets edged lower in a holiday-shortened week. The Shanghai Composite Index(SSE) declined 0.06% while the blue chip CSI 300 was down 0.41% on Monday, the last day of trading before the CNY holiday. Markets on the mainland are closed from January 28 to February 4 for the nationwide holiday and will resume trading February 5. In Hong Kong, the benchmark Hang Seng Index gained 0.79% on Monday and a half-day session on Tuesday before closing for the rest of the week(refer to the above weekly performance table).

Key highlights for the week and outlook for China/HK:

1.    Government data released on Monday showed that China’s economy kicked off 2025 on weak footing. The official manufacturing Purchasing Managers’ Index (PMI) unexpectedly fell to 49.1 in January, according to the country’s statistics bureau. The nonmanufacturing PMI—which measures construction and services activity—slipped to 50.2 from December’s 52.2. 

2.    China’s manufacturing PMI is typically softer in January as millions of workers return to their hometowns for the Chinese New Year. However, other data released on Monday pointed to weakness in China’s economy at the end of 2024. Profits at large industrial companies fell 3.3% in 2024, according to the statistics bureau, marking the third straight year of declines. Economists believe the drop in industrial profits reflected the deflationary pressures on China’s economy, which is entering its third year of economy-wide price declines amid a yearslong real estate downturn that has curbed domestic demand. 

Click below SSE and .HSI indexes for their weekly charts. 

SSE weekly chart

.HSI weekly chart

Singapore

The Straits Times Index (STI) closed a strong week with 1.36% gain to end the 1^st month, closing at 3855.82 level, most of the gains attributed to Friday’s 1.4% up, led by the three heavyweight banks and SingTel. It closed about 30 points off its record high hit recently. Refer to below STI stocks weekly performance table.

Click below for STI weekly chart.

STI weekly chart

Source: Some contents and data excerpted from various public market reports.