Published February 7, 2025
Below are some comments from Delta Research on the dynamics behind market moves. As the stock market churns, it’s interesting to read what goes on under the surface of the index headlines.
“On Monday January 27, Nvidia depreciated -17% ($589 billion) in response to the announcement from China regarding the price/performance characteristics of their DeepSeek R1 AI engine.On Monday February 3, the major market indexes depreciated by 1-3% on news that tariffs may be placed on imports from Mexico, Canada and China.
Investors bought the dips and the combination of strong buying pressure and lessening of the initial news shock stimulated market recovery. The S&P 500 is trading within 1% of its all-time high.
Retail investors are buying U.S. equities at a record pace. Four of the five largest buying days of all-time for retail stock buying have taken place in the past two weeks. The net imbalance between buy and sell orders ranges from $4-$5 billion per day. The strongest demand is for Nvidia, Tesla, Apple, Amazon, Microsoft, Advanced Micro Devices and Broadcom.
About 60% of the S&P 500 companies have their stock repurchase window open as of today. Next week, the corporate stock buyback demand dynamic turns on in full force. There are 250 trading days in 2025. Investment bank Goldman Sachs projects that $1.45 trillion worth of stock buybacks have been authorized for 2025 – an all-time high.
When the stock buyback window is open (after the regulated amount of “blackout” time surrounding a quarterly earnings announcement), average corporate stock buybacks are $7 billion per day. Because of timing differences between corporate quarterly earnings announcements, the stock buyback window is never completely closed. When it is closed for most companies, average daily stock buybacks are $3 billion.
Why do stocks go up and down? Sometimes, the best answer for why they go up is there are more buyers than sellers.”
Market Update
The announcement of tariffs on goods coming from Mexico and Canada, rumored the previous Friday, sent stocks lower at Monday’s market open. Before the rumors on Friday, the stock market was close to all-time highs. From there to Monday’s low point, stocks lost -4%. But buyers bought Monday’s slide to send stocks recovering the morning losses as the day went on. The announcement that the Mexico tariffs would be pushed out a month supported the recovery. The Nasdaq still ended the day down -1.2%. The rebound continued Tuesday as Canada’s tariffs also got pushed out. Strong earnings from AI software provider Palantir and online music provider Spotify helped the Tuesday rebound in tech/consumer stocks. The day’s advance offset the Monday downdraft. After the close, earnings from Alphabet disappointed investors leading that stock to fall -7% while chip supplier AMD and ride provider Uber also came under post-earnings pressure. The market broadly overcame those losses to finish +0.4% as interest rates dipped. Solid earnings from a bevy of consumer companies underpinned another day of gains Thursday. From clothing maker Ralph Lauren, handbag conglomerate Tapestry, hotelier Hilton to tobacco products company Philip Morris, they all posted better than expected earnings and consequential stock moves. The S&P 500 lifted another +0.4% Thursday. Friday opened strong as a solid monthly jobs report did not dampen the positive Wall Street mood. However, stocks reversed notably lower when the Trump Administration announced that another round of tariffs was soon to be announced. The high-growth Nasdaq 100 (QQQ) closed the day down -1.3% after being higher by +0.5% at the day’s opening bell.
Tariff whipsaws and a heavy earnings calendar gave investors plenty to consider this week. After recovering Monday’s slide and pushing higher, stocks sold off Friday to leave the S&P 500 -0.17% lower on the week. The Nasdaq 100 (QQQ) managed a slight +0.12% weekly close. Small cap stocks were off -0.21%.
Warm wishes and until next week.