- Asian Stocks Gain, Dollar Drops Before BOJ Speech: Markets Wrap
Asian stocks rose and currencies edged higher as traders digested a rate pause by the Federal Reserve and
shifted focus to a pair of central bank speeches taking place in the region. Shares in Japan moved up after an
earlier decline, helping the MSCI Asia Pacific Index gain around 0.2%. Liquidity remains thin, with many of the
region’s major equity markets — including those in Hong Kong, mainland China and South Korea — closed for
the Lunar New Year holiday. Investors in the region had plenty to digest from US trading hours — but none of
it pointed to a clear direction for stocks. The Fed’s decision to hold rates was widely expected, and earnings
from International Business Machines Corp., Meta Platforms Inc., Microsoft Corp. and Tesla Inc. sent mixed
signals to investors. - S&P 500 closes lower as Fed pauses rate cuts, Nvidia resumes slide
The S&P 500 slid on Wednesday after the Federal Reserve left interest rates unchanged in its first policy
decision of the year, while Nvidia slipped following a strong session. The broad market index fell 0.47% to
close at 6,039.31, while the Nasdaq Composite lost 0.51% to end at 19,632.32. The Dow Jones Industrial
Average shed 136.83 points, or 0.31%, to 44,713.52. - Oil steady as markets await clarity on tariffs by Trump on Canada, Mexico
Oil prices were little changed in early trading on Thursday, as markets watched for tariffs by U.S. President
Donald Trump on Mexico and Canada, the two largest suppliers of crude oil to United States. Brent crude
futures LCOc1 rose 7 cents, or 0.1%, at $76.71 a barrel by 0122 GMT. U.S. crude futures CLc1 climbed 17
cents, or 0.2%, to $72.79. U.S. crude futures had settled at their lowest price this year on Wednesday. U.S.
President Donald Trump still plans to make good on his promise to issue tariffs on Canada and Mexico on
Saturday, White House spokeswoman Karoline Leavitt told reporters on Tuesday. Trump’s nominee to run
the Commerce Department, Howard Lutnick, said on Wednesday that Canada and Mexico can
avoid the tariffs if they act swiftly to close their borders to fentanyl, while vowing to slow China’s
advancement in artificial intelligence. On the demand front, crude oil stockpiles in the U.S. rose by 3.46
million barrels last week, roughly in line with analysts’ estimate for a rise of 3.19 million barrels, as winter
storms that swept the country last week hit refinery utilization. - Gold little changed after US Fed holds rates steady
Gold prices were flat in early Asian hours on Thursday after the Federal Reserve’s decision to hold
interest rates steady offered little clarity on the U.S. monetary policy path this year.
Spot gold were little changed at $2,761.79 per ounce, as of 0049 GMT. U.S. gold futures added 0.2% to
$2,774.50. The U.S. central bank held interest rates steady on Wednesday and its Chair Jerome
Powell said the Fed would wait for signs of further progress on inflation, or of labor market weakness before
it would cut interest rates further. Higher interest rates dampen non-yielding bullion’s appeal. The Fed’s rate
decision on Wednesday was widely anticipated, following its rate cuts in 2024, which reduced the benchmark
rate by a full percentage point. - Fed holds rates steady, takes less confident view on inflation
The Federal Reserve held its key interest rate in check Wednesday, reversing a recent trend of easing policy
as it examines what is likely to be a bumpy political and economic landscape ahead. In a widely anticipated
move, the central bank’s Federal Open Market Committee left unchanged its overnight borrowing rate in a
range between 4.25%-4.5%. The decision followed three straight cuts since September 2024 worth a full
percentage point and marked the first Fed meeting since frequent Fed critic Donald Trump assumed the
presidency last week and almost immediately made known his intentions that he wants the central bank to
cut rates. The post-meeting statement dropped a few clues about the reasoning behind the decision to hold
rates steady. It offered a somewhat more optimistic view on the labor market while dropping a key reference
from the December statement that inflation “has made progress toward” the Fed’s 2% inflation goal. “The
unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid,”
the new language read. “Inflation remains somewhat elevated.“ A stronger labor market and stubborn
inflation would provide less incentive for the Fed to ease policy. The statement again indicated that the
economy “has continued to expand at a solid pace.“ Recent statements from policymakers have showed
some apprehension about whether progress in bringing down inflation has stalled. Officials also have said
they want to see how the previous cuts are working their way through the economy though most expect rate
cuts this year. - BOJ to Slice Almost $500 Billion Off Balance Sheet With QT Move
The Bank of Japan made a significant step toward shrinking its massive balance sheet last week, while market
watchers were fixated on the biggest interest rate increase from the central bank in 18 years. The BOJ
decided on Friday to offer no new lending from July under its fund-provisioning program to stimulate bank
lending. The program’s outstanding loans stood at ¥77 trillion ($496 billion) as of Jan. 20, accounting for
around 10.4% of the central bank’s overall balance sheet, according to BOJ data. - Volatile borrowing costs stir memories of UK’s pensions crisis — but insiders say this time, it’s a ‘nice
opportunity’
A sharp spike in U.K. borrowing costs this year triggered memories of the 2022 “mini-budget” crisis,
which rocked the country’s pension funds and led to emergency market intervention by the Bank of England.
But this year, U.K. pension providers have not only weathered recent volatility in government bonds, they
have benefited from them, and even increased the so-called liability-driven investments (LDIs) that wreaked
such havoc previously. Yields on U.K. bonds, known as gilts, jumped to their highest levels in decades earlier
this month before cooling nearly as fast. However, they remain elevated. On Wednesday, gilt yields ticked
lower after U.K. Finance Minister Rachel Reeves gave a widely anticipated speech promising to go “further
and faster” to boost Britain’s sluggish economy. Yields across the board were 3 basis points lower at 11:50
a.m. London time. In Sept. 2022, a massive sell-off in U.K. debt drove down the value of assets held by
pension funds, a major investor in gilts, and led to margin calls on their LDI funds. These largely leveraged
investments are often used by pension funds as a hedge against factors such as inflation and interest rate
movements. The knock-on effect from the margin calls threatened to push several defined benefit pension
funds into insolvency. The sell-off was prompted by a major package of unfunded tax cuts announced by
then-Prime Minister Liz Truss. The proposals, described as a “mini-budget,” were announced at a time when
U.K. inflation was sky-high, interest rates were rising and the economy was stagnant. Market turbulence
spurred the Bank of England to intervene with an emergency purchase of long-dated bonds, the debt LDI
funds were particularly sensitive to. The central bank later said a number of pension funds were hours from
collapse. Investors still suffer from a slight degree of “post-Truss stress disorder” when bond prices fluctuate,
said Jason Borbora-Sheen, portfolio manager in the multi-asset team at investment manager Ninety One. - IBM shares rise 9% on earnings beat
IBM reported fourth-quarter earnings on Wednesday that topped Wall Street expectations for earnings and
revenue. The shares rose as much as 10% in extended trading before giving up gains and settling at 9%.
Here is how the company did versus LSEG consensus expectations: Earnings per share: $3.92 adjusted vs.
$3.75 expected; Revenue: $17.55 billion vs. $17.54 billion expected. IBM reported $2.92 billion in net income,
or $3.09 per diluted share, versus $3.29 billion, or $3.55 per share, in the year-ago period. IBM said it
expected full-year growth, adjusted for currency, of about 5%, and $13.5 billion in free cash flow in 2025.
IBM’s overall revenue rose 1% during the quarter. For the entire year, IBM’s revenue rose 1% to $62.8 billion,
with software growing 8% while infrastructure revenue declined 4%. IBM said its software segment grew 10%
year over year to $7.9 billion, partially due to demand for artificial intelligence technology and strong
performance from its Red Hat Linux operating system. Revenue in IBM’s consulting division dropped 2% to
$5.2 billion in the quarter. In a statement, IBM CEO Arvind Krishna said the company has recorded $5 billion
in bookings for its generative AI business, which includes sales and future sales in the company’s software
and consulting division. “We closed the year with double-digit revenue growth in Software for the quarter,
led by further acceleration in Red Hat,” Krishna said in a statement. “Clients globally continue to turn to IBM
to transform with AI.” - Tesla fourth-quarter results miss estimates as automotive revenue drops 8%
Tesla reported earnings and revenue for the fourth quarter that missed analysts’ estimates. The stock initially
fell in after-hours trading before rebounding. Here is how the company did compared with estimates from
analysts polled by LSEG: Earnings per share: 73 cents adjusted vs. 76 cents expected; Revenue: $25.71 billion
vs. $27.26 billion expected. Tesla’s revenue increased just 2% from $25.17 billion a year earlier. Automotive
revenue fell 8% to $19.8 billion from $21.56 billion in the same quarter last year, and of that, $692 million
came from regulatory credits. Operating income declined 23% year over year to $1.6 billion. The company
cited reduced average selling prices across its Model 3, Model Y, Model S and Model X lines as a major reason
for the decline. Net income dropped 71% from a year earlier to $2.32 billion, or 66 cents a share, from $7.93
billion, or $2.27 a share. Last year’s net income figure was bolstered by a $5.9 billion one-time noncash tax
benefit. Tesla’s earnings report follows a steep rally in the company’s stock price tied to the election
of President Donald Trump. Tesla CEO Elon Musk was the biggest backer of Trump’s campaign efforts and is
now leading the president’s new government efficiency advisory board. The company’s stock price has rallied
sharply since Trump’s victory in November as investors bet that Musk’s influence would lead to both
favorable policies and less oversight of his companies. Operating margin for the quarter came in at 6.2%,
narrowing from 8.2% during the same period a year earlier and 10.8% in the previous quarter. In early
January, Tesla reported deliveries for the fourth quarter of 495,570. For the full year, deliveries came in at
about 1.8 million, marking the company’s first annual decline. Deliveries are the closest approximation of
sales reported by Tesla, but are not precisely defined in the company’s shareholder communications. - Meta shares pop after company beats on revenue
Meta shares were up slightly in after-hours trading on Wednesday after the company reported fourth
quarter earnings that beat on the top and bottom lines. Here is how the company did compared with
estimates from analysts polled by LSEG: Earnings per share: $8.02 vs. $6.77 expected; Revenue: $48.39 billion
vs. $47.04 billion expected. Meta CEO Mark Zuckerberg said he expects 2025 to redefine the
company’s relationships with governments. “We now have a U.S. administration that is proud of our leading
companies, prioritizes American technology winning and that will defend our values and interests abroad,”
Zuckerberg told investors on a call. “I am optimistic about the progress and innovation that this can unlock.”
Sales in the fourth quarter jumped 21% year over year while net income grew 49% to $20.8 billion, up from
$14 billion a year earlier. Meta said it expects first-quarter revenue to be in the range between $39.5 billion
and $41.8 billion. The midpoint of that figure trailed analysts’ expectations of first-quarter revenue of $41.73
billion. The company’s Meta AI chatbot surpassed 700 million monthly active users, Chief Financial Officer
Susan Li told analysts. That is up from 600 million in December. Zuckerberg said he expects Meta AI to reach
one billion users this year. “Once a service reaches that kind of scale, it usually develops a durable, long-term
advantage,” Zuckerberg told analysts on Wednesday. The emergence of DeepSeek — a high-performing
open-source large language model built by a Chinese lab for a fraction of the cost of its American
counterparts — validates Meta’s commitment to an open-source approach to AI, Zuckerberg said. Meta has
been pushing its family of Llama-branded LLM models as an open-source alternative to technologies from
OpenAI and Google. - Microsoft shares slip on weak quarterly revenue guidance
Microsoft shares tumbled as much as 5% in extended trading Wednesday after the software company issued
fiscal second-quarter results that included lighter growth in Azure cloud computing services than expected.
The company also gave a disappointing quarterly revenue forecast. Here’s how the company did in
comparison with Wall Street expectations, based on a survey of analysts by LSEG: Earnings per share: $3.23
vs. $3.11 expected; Revenue: $69.63 billion vs. $68.78 billion expected. With respect to guidance, Amy Hood,
Microsoft’s finance chief, called for $67.7 billion to $68.7 billion in fiscal third-quarter revenue compared
with the $69.78 billion consensus from LSEG. Microsoft’s revenue grew 12.3% year over year in the fiscal
second quarter, which ended on Dec. 31, according to a statement. That represents the slowest growth since
mid-2023. Net income of $24.11 billion was up from $21.87 billion in the same quarter a year ago.
The company’s Intelligent Cloud segment, which contains the Azure cloud, contributed $25.54 billion in
revenue. That was up about 19% but below the $25.83 billion consensus among analysts polled by
StreetAccount. Revenue from Azure and other cloud services jumped 31%, down from 33% in the prior
quarter. Microsoft now has a $13 billion annualized revenue run rate for artificial intelligence, CEO Satya
Nadella was quoted as saying in the statement. Of the growth in the fiscal second quarter, 13 percentage
points came from AI. Microsoft does not disclose Azure revenue in dollars. Analysts polled by CNBC and
StreetAccount had been looking for 31.9% and 31.1% growth, respectively. For the fiscal third quarter, Hood
sees 31% to 32% in Azure growth at constant currency, as the company addresses execution challenges and
continues to endure capacity constraints. StreetAccount’s consensus at constant currency was 33.4%. In
October, Hood had said Azure growth would accelerate in the second half of the fiscal year in comparison
with the first half. - Alibaba unveils new version of Qwen 2.5 AI model
Alibaba has released its latest AI model, Qwen 2.5-Max, which it claims to surpass the ‘leading state-of-the
art models’, including DeepSeek V3. Alibaba’s cloud unit was cited by Reuters as saying in an announcement
posted on its official WeChat account as saying: “Qwen 2.5-Max outperforms almost across the board GPT
4o, DeepSeek-V3 and Llama-3.1-405B.” Alibaba said its Qwen2.5-Max outperforms DeepSeek V3 in various
benchmarks, including Arena-Hard, LiveBench, LiveCodeBench, and GPQA-Diamond. It also showed strong
performance in other assessments such as MMLU-Pro. The evaluation of Alibaba’s AI model included
comparisons with other leading models, such as the open-weight MoE model DeepSeek V3, the dense model
Llama-3.1-405B, and Qwen2.5-72B. In a blog, Alibaba’s Qwen said: “Now Qwen2.5-Max is available in Qwen
Chat, and you can directly chat with the model, or play with artifacts, search, etc.” Recently, DeepSeek
released AI assistant and R1 model which led to a significant drop in tech shares in Silicon Valley. The low
development and operational costs of the Chinese startup’s models have raised questions about the large
expenditures of US-based AI firms. ByteDance, the parent company of TikTok, also entered the fray with an
update to its AI model, claiming superiority over OpenAI’s offerings in benchmark tests. This move mirrored
DeepSeek’s assertions of its R1 model’s competitive performance. The release of DeepSeek-V2 in May 2024,
initiated price competition among AI models in China. - Victoria’s Secret shares sink 8% on CFO transition, narrowed Q4 guidance
Victoria’s Secret & Co (NYSE:VSCO) updated its fourth-quarter forecast on Wednesday and appointed Scott
Sekella as the new Chief Financial Officer (CFO) following Timothy Johnson’s decision to retire in June 2025.
Sekella previously held the CFO position at Joann, a fabric and crafts retailer. This appointment follows the
earlier naming of Hillary Super as the new CEO in October. The company’s shares plunged nearly 8% after the
market opening bell. The move comes amid a turnaround phase for Victoria’s Secret. Alongside the
leadership change, the company has updated its fourth-quarter guidance, raising the lower end of its net
sales, adjusted operating income, and adjusted earnings per share (EPS) expectations. Despite the current
macroeconomic headwinds that may affect short-term top-line trends, Jefferies analysts maintain a positive
outlook on VSCO’s long-term potential. “While we do not expect a linear recovery, we believe that VSCO’s
long-term opportunity remains unchanged and that the company is capable of restoring lost sales while
recapturing margin,” analysts led by Corey Tarlowe said in a note. As such, the firm’s analysts have left their
estimates largely unchanged, positioning them at the high end of the company’s updated guidance. Since
Super’s arrival, VSCO has seen positive signs such as increased foot traffic in October and November, a
significant boost in social media engagement, and a slight uptick in web traffic in December. “Looking ahead,
we believe that the company is well-positioned to continue witnessing healthy data trends,” Jefferies analysts
concluded. Following the guidance update, Victoria’s Secret now expects its fourth-quarter adjusted
operating income to be between $260 million and $270 million, compared to its previous range of $240
million to $270 million. Analysts surveyed by Bloomberg had estimated $266.5 million. 3rd party Ad. Not an
offer or recommendation by Investing.com. See disclosure here or remove ads. The company projects net
sales growth of 3% to 4% and revised its adjusted EPS forecast to $2.20 to $2.30, up from the prior range of
$2.00 to $2.30. The consensus estimate stood at $2.27. - Nvidia Stock Drops Wednesday as AI Chipmaker’s Roller-Coaster Week Continues
Nvidia shares tumbled Wednesday, dashing hopes for a quick recovery from losses earlier in the week amid
concerns about competitiveness of American AI firms and their spending on the emerging technology. The
rapid rise of lower-cost models from Chinese companies that can compete with those from leading American
firms has spurred a reckoning on Wall Street. Bank of America analysts told clients in a note Wednesday they
see this as “AI’s Sputnik moment,” suggesting the competition could push U.S. firms to spend even more on
AI, to the benefit of Nvidia, Broadcom, and other AI chipmakers.
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