March 10, 2025
What You Need to Know Today:
China’s DeepSeek news leads to AI stock rout–do you think AI stocks might have been overvalued?
News that DeepSeek a China AI startup had developed an open-source AI model that matched the performance of U.S. AI models from OpenAI, Alphabet, and Meta platforms at a fraction of the cost sent AI stocks reeling today, Monday, January 27. Nvidia (NVDA) shares fell 17%. Broadcom (AVGO) similarly fell 17%. The Dow Jones Industrial Average added 0.4%. A gauge of the “Magnificent Seven” megacaps slid 3.2%. The Russell 2000 slipped 1.3%. Wall Street’s “fear gauge”—-the VIX—soared 20% the most since mid-December to almost 18.The yield on 10-year Treasuries declined 10 basis points to 4.53%. The Bloomberg Dollar Spot Index rose 0.1%. Bitcoin fell 3.9%. Here’s what freaked out the markets today.
“Drill, baby, drill”? OPEC doesn’t think so
Oil edged lower–West Texas Intermediate closed down 0.06% and Brent ended 0.08% lower–after OPEC+ announced plans to defer supply increases for three months, but still add barrels starting in April to a market that’s expected to be oversupplied. The Organization of the Petroleum Exporting Countries and its allies agreed to delay their planned output hike.
Peak gasoline demand is near (or maybe even here) in China
The forecasts don’t totally agree on the date but they do agree on the trend: Because China’s sales of electric vehicles and hybrids accounted for more than half of retail passenger vehicle sales in the four months from July, the country’s demand for gasoline is near a peak. And unlike in the U.S. and Europe where peaks in consumption were followed by long plateaus, the drop in demand in the world’s top crude importer is expected to be more pronounced. Brokerage CITIC Futures sees Chinese gasoline consumption dropping by 4% to 5% a year through 2030. The
International Energy Agency says demand peaked in 2024 and forecasts a 2.3% decline in 2025.
When does that U.S.-China tech trade war arrive? Right about now
Yesterday, Tuesday, December 3, China retaliated to a new round of U.S. technology restrictions from the Biden Administration with a ban on exports of high-tech minerals gallium, germanium, and antimony. Beijing will also place tighter controls on sales of graphite. On Monday the White House slapped new restrictions on the sale of high-bandwidth memory chips made by U.S. and foreign companies to China. The measures blacklisted 140 additional Chinese entities with a focus on companies that produce chip manufacturing equipment that’s crucial to China’s pursuit of semiconductor self-sufficiency. The metals targeted in China’s export ban are used in everything from semiconductors to satellites and night-vision goggles.
Saturday Night Quarterback (on a Sunday) says, For the week ahead expect…
I the Big Event to be Friday morning’s report of the November jobs numbers. The Dow Jones Industrial Average rose more than 2% last week. The Nasdaq Composite and the Standard & Poor’s 500 rose more than 1%. Both the S&P 500 and Dow Jones ended November at all-time highs. A ”good” jobs report, which is likely, will keep the records coming for at least another week–until the usual Fed meeting jitters set in on the run up to the central bank’s meeting on December 18.
Adding Berkshire Hathaway as Pick #9 in my Special Report “10 New Stock Ideas for an Old Rally”
Today I added Berkshire Hathaway (BRK-B) as Pick #9 in my Special Report “10 New Ideas for an Old Rally.” Here’s what I wrote in that Special Report.
Special Report: 7 Steps to Take Now to Protect Your Portfolio While You Still Reap Market Gains–Steps 1-5
Can you have your cake and eat it too? That’s basically the question stock investors and traders face now. Is there a way to build a strategy that will put profits in your pocket if the rally that set in at the end of 2023 continues? And that will hedge the downside so the your portfolio won’t tumble if the market does? Or that will at least lose less? Or that might even make some money on its downside bets. I think there is. And that’s the subject of this Special Report. Today Steps 1-3
Live Market Report (20 minute delay)
Not so fast–the rethink of when the Fed will start to cut rates continues to hit stock and bond prices
Last month, the bond market was almost fully pricing the first interest rate cuts from the Federal Reserve in March. Now, though the odds for a 25 basis point cut are down to more like 50/50. Today, January 17, the yield on the 10-year Treasury rose another 5 basis points to 4.10%.
China economic growth hit official target in 2022, but population plunge accelerates
Well, what did you expect Chinese officials to talk about at Davos? Yesterday, Premier Li Qiang said in a speech at the World Economic Forum in Davos, Switzerland, that China’s economy is expected to have grown 5.2% in 2023. Which would exceed the government’s target of “around 5%” set in March. Li’s estimate roughly agrees with the average 5.3% expected by economists. In 2022, China’s economy grew at a 3% rate.But also yesterday, the National Bureau of Statistics said that China’s population decline has accelerated.
Good news/bad news from China on stimulus
Chinese officials have indicated that the government is considering issuing 1 trillion yuan ($139 billion) of new debt under a special sovereign bond plan. The plan would sell ultra-long sovereign bonds to fund projects related to food, energy, supply chains, and urbanization. The sale of this type of ultra-long bonds is rare: In the aftermath of the Asian Financial Crisis in 1998, for example, the government issued special debt to replenish capital for major state-owned banks. The most recent sale was in 2020, when authorities issued 1 trillion yuan worth of those bonds to pay for pandemic response measures. The new round of stimulus is good news for a global economy that has been struggling with lagging growth as China’s economy has slowed. But the plan is bad news for anyone worried about the deep structural problems facing China’s economy.
Nothing exceeds like excess–too much of a good thing for bond prices
Mae West said, “Too much of a good thing is never enough.” For the financial markets that’s just not true, however. The markets are prone to swing to excess and then to painfully retrace the extreme end of the swing. You can see it happening now with interest rates and the bond market.
Hertz pulls the plug on electric cars–especially Tesla
Hertz (HTZ) plans to sell a third of its U.S. electric vehicle fleet and reinvest in gas-powered cars. The company says the shift is due to weak demand and high repair costs for its electric vehicle fleet. Which is dominated by Telsa’s electric vehicles. Electric vehicles make up about 11% of the Hertz fleet and 80% of those electric vehicles are Tesla. The news certainly isn’t a plus for electric cars and electric car makers. But I think it’s also important not to forget that Hertz is struggling to show improvements to its bottom line. Tesla’s price cuts–and their effect the resale value of the Hertz fleet–may have more to do with this abrupt about face than weak demand and higher repair costs.
Special Report: 10 Great Growth Stocks that Are Getting Greater–today my 10th (and final) pick QCOM
GREATER Growth Stock Pick #10: Qualcomm (QCOM). I think the market and the current stock price are missing a good prt of the growth story for Qualcomm. Which is why I find the stock undervalued enough to buy here. Right now the market disagrees. However, I’ll be adding the stock to my Jubak Picks and Volatility Portfolios on Tuesday, January 16.
Saturday Night Quarterback says, For the week ahead expect…
Like every season of earnings reports, this one will be chock full of real earnings news and will come complete with strenuous efforts at gaming those real results. Three big questions for the week-and for earnings season. First, question: How much “bad news” has been already discounted by analyst cuts to earnings expectations?
Fed uses CPI inflation “miss” to push back on timing of interest rate cuts
Federal Reserve officials were out with one message today: The slightly higher-than-expected CPI inflation number for December/the slightly-slower-than-expected slowdown in CPI inflation argues that there’s still more work to be done on bringing inflation down to the Fed’s 2% target. And that talk of a rate cut in March is premature.
Ooops! CPI inflation doesn’t dip in December as expected
CPI inflation isn’t falling as quickly as economists had predicted and as investors and traders had hoped. At the least, the numbers call into question the belief that the Federal Reserve will begin to cut interest rates as early as its March 20 meeting.
Is the debt market ignoring the coming wave of bond supply?
Right now all that the bond market and indeed all the financial markets care about is when will the Federal Reserve begin to cut interest rates. The consensus is that sometime relatively soon–March or more likely June–the Fed will begin to deliver interest rate cuts that will total somewhere around 100 basis points (at least) for 2024. But what if the Federal Reserve and other central banks around the world really aren’t in control of interest rates in the bond market anymore?
Good news for chip stocks–well, for some chip stocks
In November global chip sales rose for the first time in more than a year. Global semiconductor revenue added up to $48 billion in November, a 5.3% increase from a year earlier, according to the Semiconductor Industry Association. Sales rose a more moderate 2.9% from October. But the good news didn’t extend to all chip segments.
Earnings season starts–Part 1 banks to disappoint
Earnings season for the fourth quarter of 2023 begins on Friday, January 12 with reports from the big banks JPMorgan Chase (JPM), Wells Fargo (WFC), Citigroup (C), and Bank of America (BAC). Which means that earnings season is going start off with a dull thud. More than 70% of the Standard & Poor’s 500 companies that are scheduled to report earnings for the fourth quarter over the next few weeks are banks and the banking segment of the the financial sector in the index is projected by Wall Street analysts to show a 21% year over year decline in earnings
Saturday Night Quarterback says, For the week ahead watch…
The big short run question–at least ahead of the Federal Reserve’s March 20 meeting on interest rates–is whether the financial markets have gotten too far ahead of the Fed on the pace of interest rate cuts. Here’s what to watch.
Job market looked solid in December–or did it?
The U.S. economy added 216,000 jobs in December, up from 173,000 the previous month. That was a bg surprise to Wall Street. Economists surveyed by Bloomberg had expected had added 175,000 jobs . The unemployment rate held steady at 3.7% for the month from November, according to the Bureau of Labor Statistics. Economists had expected the unemployment rate to tick higher to 3.8%. The the BLS revised previous reports of job gain donward for December and November. Looking solely at these headline numbers, you’d conclude that the labor market is running hotter than expected/hoped by investors and that this report lowered the odds that the Federal Reserve would begin cutting interest rates as early at its March 20 meeting. And that fears that the Fed would delay interest rate cuts would hurt stocks. That isn’t exactly what happened today
ASML shares hit (again) by export restrictions worries
You may have noticed that shares of chip equipment maker ASML Holding have been in retreat lately. The shares are down from a $757 close on December 29 to $700 today, January 4. That’s at 7.5% drop. So what’s up?
Progress of a sort: Wind sector troubles continue to unwind
I think this is good news, sort of, for the very troubled wind power sector.
Yesterday, January 3, Equinor (EQNR) and BP (BP) announced that they would terminate their contract and exit the 1.2 gigawatt Empire Wind 2 project off the coast of New York. Why is this good news?
Big tech NASDAQ 100 records four-day losing streak
Wall Street strategists began the year calling for a pull back in U.S. stocks after the huge year-end rally of 2023. So far that call is right on. NASDAQ 100 stocks fell 1.1% today Wednesday, January 3, to extend their losing streak to four sys, the longest in more than two moths. The Standard & Poor’s 50 ended the y down 0.80% and the Dow Jones Industrial Average closed down 076%. The NASDAQ Composite lost 1.18% on the day. The Russell 2000 small-cap index dropped 3.3%. The CBOE S&P 500 Volatility Index (VXI) gained 644% to a still very low “fear” rating of 14.05. But what’s the cause and what’s the effect?
BYD climbs over Tesla to become No. 1 in electric car deliveries in the fourth quarter
This change at the top of the electric car market was widely expected. The only debate was whether it take place in the last quarter of 2023 or early in 2024. Now, we know. With both Tesla (TSLA) and BYD (BYDDF) reporting fourth quarter delivery numbers in the last few days, the switch at No. 1 is now complete.
Special Report: 10 Great Growth Stocks that Are Getting Greater–today my 9th pick PANW
GREATER Growth Stock Pick #9: Palo Alto Networks (PANW). I’m not going to try to convince you that shares of cyber-security favorite Palo Alto Networks are a value stock. It trades at 166 times trialing 12-month earnings per share. And I’m not going to try to convince you that this is an undiscovered stock that’s going to sneak up on anyone. The shares was up 111% in 2023. (The stock has been a member of my long-term 50 Stocks Portfolio since July 17, 2019. In that time the position is up 296%.) But remember the point of this Special Report–I’m looking for great growth stocks, which aren’t cheap in this market by any means, with catalysts in the next year or two that will push growth higher. And here I think Palo Alto Systems rings the bell three times over.
Special Report: 10 Great Growth Stocks that Are Getting Greater–today my 8th pick BYD
GREATER Growth Stock Pick #8: BYD (BYDDF). I know; I know. What’s a Chinese stock doing on this list? It’s here because BYD, not Tesla (TSLA) is the big growth story in electric vehicles and not just for this month–but for years. And because I can see two catalysts that are about to power this stock higher. Morningstar calculates that BYD is 20% undervalued right now. Because this is a China stock we’ll need to take a deep look at valuation later in this post. But first, the growth story.
Jim’s Stock Alerts
Download Jim’s eBook for Free
