Breakfast News: Economy Fortifies, Stocks Fall
January 8, 2025
| S&P 500 5,909 (-1.11%) |
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| Nasdaq 19,490 (-1.89%) |
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| Dow 42,528 (-0.42%) |
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| Bitcoin $97,041 (-4.79%) |
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Source: Image created by JesterAI.
1. Inflation Floats Back Into Focus
Tuesday saw the S&P 500 fall by more than 1%, with the Nasdaq giving up close to 2%, as new economic data raised inflationary fears. The U.S. services sector picked up in November, and job openings steadied after slowing in the previous few months. A stronger economy means less pressure on the Federal Reserve to cut interest rates. The CME FedWatch tool shows 18% of analysts now expecting no further cuts in 2025.
- “Investors clearly shouldn’t be indifferent to today’s market valuation”: Value investor Howard Marks, in his latest memo, suggests that high valuations mean we could be in for weaker returns. He puts the price-to-earnings ratio for the S&P 500 at 22, near the top of its long-term range.
- Software stock down 8%: Palantir (PLTR -2.52%) led Tuesday’s AI-related falls, after Cathie Wood's ARK Invest sold off $15 million’s worth of stock. That’s after a 340% gain in 2024.
2. AWS’s Increasing Importance to Amazon
Amazon (AMZN 0.01%) is joining Microsoft (MSFT 0.52%) in the race to invest big in 2025. The Hidden Gems rec said its Amazon Web Services (AWS) division will invest $11 billion to grow its AI and cloud computing infrastructure in Georgia, helping to cement the state’s “position as a hub for cutting-edge digital innovation.”
- “Multi-decade tailwinds ahead”: Motley Fool CIO Andy Cross shone a light on Amazon CEO Andy Jassy commenting how AWS is a huge beneficiary of AI spending: “AWS’s AI business is growing “a triple-digit” percentages and is growing 3x+ faster than AWS at the same stage of its life cycle.”
- “The adoption of cloud computing has gained significant momentum in Thailand”: Amazon has also just announced AWS Asia Pacific (Thailand), its first infrastructure region in Thailand and fourteenth in the Asia Pacific area.
3. Earnings Recommence
Dividend Investor recommendation RPM International (RPM 0.68%) posted Q2 results on Tuesday and continued its run of beating revenue and earnings expectations, this time by more than 3%. Citing a “a mixed economic environment,” the company posted guidance for flat Q3 sales.
- Year-over-year improvement expected: Jefferies Financial (JEF 0.69%) will post full-year results after market close today, after marginally missing Q3 estimates. Jefferies is up 740% since first being recommended by Stock Advisor in 2009.
- Profits expected to fall: Before the bell we’ll have Q3 results from Albertsons (ACI 0.81%), its first update since the attempted Kroger (KR -0.41%) merger collapsed. Investors will be looking for any declines in junk food sales as weight loss drugs gain in popularity.
4. When Huang Talks, Investors Listen
Nvidia (NVDA -0.02%) eventually fell 6% on Tuesday after hitting an all-time high of $153 in anticipation of Jensen Huang’s keynote speech at the Consumer Electronics Show. He’s since been sharing his thoughts in an analyst question-and-answer session.
- “AI agents are going to get deployed”: The CEO cited software engineering, digital marketing, and customer service as primary fields for AI agents. Software agents that can perform autonomous tasks, like collecting data and filling forms, are big in Amazon’s AWS plans as well.
- “If you said 15 years for very useful quantum computers, that would probably be on the early side”: Quantum Computing (QUBT -43.34%), D-Wave Quantum (QBTS -36.13%) and IonQ (IONQ -39.00%) all face double-digit percentage falls on Wednesday, though Huang mused “If you said 30 years, it’s probably on the late side.”
5. Foolish Fun
Amazon is up 135% over the last 5 years. Across the same period, the S&P 500 is up 80%.
Will Amazon be a market-beater over the next 5 years? Debate with friends and family, or become a member to hear what your fellow Fools are saying!
