Market Update: S&P 500 Performance

The S&P 500 experienced a dip on Friday but recorded a slight increase over the week. For the first time, it briefly exceeded the 7,000 mark on Wednesday. The week was packed with news: ten portfolio companies, including three major players, released their earnings; the Federal Reserve maintained interest rates on Wednesday; software stocks faced significant declines on Thursday; and President Trump announced his choice to replace Jerome Powell as Fed chairman on Friday.

Weekly Performance Summary

During the week, the S&P 500 rose by 0.34% and achieved a 1.37% increase for January. CNBC highlighted that a January gain tends to be a positive indicator for the rest of the year, reflecting the January Barometer. Meanwhile, the Nasdaq remained essentially flat for the week and saw a 0.95% gain for the month.

Tech Earnings Highlights

Tech-related earnings had a strong influence on the market. Meta Platforms and Microsoft reported earnings that caused their stocks to move in opposite directions. Meta’s shares surged almost 9% after an impressive earnings report on Wednesday, while Microsoft’s stock plummeted over 8% due to disappointing results from its cloud computing segment. Apple managed to break an eight-week losing streak, posting strong earnings driven by a 23% rise in iPhone sales, yet shares fell on Friday due to ongoing concerns over memory shortages affecting costs.

Other Notable Movements

Outside the tech sector, Starbucks shares fell more than 6% despite a strong quarter and an encouraging Investor Day. Initially, the stock rose but failed to maintain these gains. In contrast, Honeywell reached an all-time high after a solid earnings report, resulting in nearly a 3% increase for the week. Dover’s stock dipped over 2% as investors took profits, while Danaher’s better-than-expected report did not lift its shares, and Boeing’s mixed results led to volatility.

Software Sector Challenges

The software sector faced a significant selloff. Club holding Salesforce dropped 7% after a wide drop in the enterprise software market, while ServiceNow seen a 10% fall despite generally favorable results and aggressive stock repurchase plans. This decline suggests a reevaluation of the market’s willingness to pay for SaaS companies, compressing price-to-earnings ratios. The drop in Microsoft shares post-earnings compounded these challenges.

Federal Reserve Developments

During the Fed’s recent meeting, Chairman Jerome Powell noted steady economic activity, with low job gains and stabilization in the unemployment rate. Therefore, interest rates were held steady after three consecutive cuts. Following this, Trump announced he would nominate Kevin Warsh to succeed Powell, pending Senate approval. The market had minimal reactions to these developments, although gold and silver, which had been rising due to concerns about the Fed’s independence, fell on Friday.

Investment Insights

The anticipation surrounding Warsh’s nomination reflects a potentially hawkish shift at the Fed, as he is regarded as a known quantity with past experience. For those interested, we shared insights on preparing portfolios for this transition. Subscribers to Jim Cramer’s CNBC Investing Club receive timely trade alerts before transactions, which adhere to specific waiting periods for execution.