A daily market update from FS Insight — what you need to know ahead of opening bell.
“My position is that America is great precisely because it is an open society, and an open society recognizes that nobody is the ultimate arbiter — and that we may be wrong at times, even if we are powerful.” — George Soros
Overnight
The Day DeepSeek Turned Tech and Wall Street Upside Down WSJ
DeepSeek Chief’s Journey From Math Geek to Global Disruptor WSJ
Why Nvidia investors are spooked by Chinese AI upstart DeepSeek FT
DeepSeek Undercuts Belief That Chip-Hungry U.S. Players Will Win AI Race WSJ
DeepSeek a ‘wake-up call’ for US tech firms, Trump says BBC
UK raises cloud competition concerns, names Microsoft and Amazon as dominant players CNBC
Trump administration’s early immigration moves risk bipartisan pushback SEM
Boeing reports its second-biggest annual loss after tough 2024 FT
Short seller Andrew Left seeks to dismiss U.S. fraud case, filing shows CNBC
Fed’s Tariffs Response Hinges on Where Americans Think Prices Are Headed WSJ
Scott Bessent pushes gradual 2.5% universal US tariffs plan FT
US Senate confirms Pete Hegseth as defense secretary SEM
Norway is set to become the first country to fully transition to electric vehicles CNBC
Chart of the Day
| Overnight |
| S&P Futures +23
point(s) (+0.4%
) Overnight range: -14 to +26 point(s) |
| APAC |
| Nikkei -1.39%
Topix -0.04% China SHCOMP flat Hang Seng +0.14% Korea flat Singapore +0.11% Australia -0.12% India +0.56% Taiwan flat |
| Europe |
| Stoxx 50 +0.49%
Stoxx 600 +0.72% FTSE 100 +0.59% DAX +0.64% CAC 40 +0.5% Italy +0.5% IBEX +1.04% |
| FX |
| Dollar Index (DXY) +0.49%
to 107.86 EUR/USD -0.59% to 1.043 GBP/USD -0.44% to 1.2444 USD/JPY +0.57% to 155.39 USD/CNY flat at 7.2446 USD/CNH +0.34% to 7.2765 USD/CHF +0.45% to 0.9061 USD/CAD +0.23% to 1.4407 AUD/USD -0.68% to 0.625 |
| Crypto |
| BTC +1.25%
to 102610.29 ETH +1.05% to 3192.06 XRP +3.6% to 3.1219 Cardano +3.32% to 0.9598 Solana +1.98% to 238.55 Avalanche -0.84% to 33.91 Dogecoin +1.58% to 0.3344 Chainlink +0.63% to 24.02 |
| Commodities and Others |
| VIX -2.07%
to 17.53 WTI Crude +0.26% to 73.36 Brent Crude +0.36% to 77.36 Nat Gas -1.35% to 3.65 RBOB Gas +0.54% to 2.039 Heating Oil +0.08% to 2.462 Gold +0.02% to 2741.48 Silver -0.23% to 30.15 Copper +0.87% to 4.269 |
| US Treasuries |
| 1M -0.8bps
to 4.3152% 3M -0.7bps to 4.2838% 6M -1.3bps to 4.2529% 12M -1.1bps to 4.1161% 2Y +2.9bps to 4.2238% 5Y +3.2bps to 4.3694% 7Y +3.2bps to 4.465% 10Y +3.2bps to 4.5667% 20Y +3.3bps to 4.8635% 30Y +3.2bps to 4.802% |
| UST Term Structure |
| 2Y-3
M Spread widened 1.6bps to -9.1
bps 10Y-2 Y Spread widened 1.0bps to 34.1 bps 30Y-10 Y Spread narrowed 0.1bps to 23.3 bps |
| Yesterday's Recap |
| SPX -1.46%
SPX Eq Wt +0.07% NASDAQ 100 -2.97% NASDAQ Comp -3.07% Russell Midcap -0.74% R2k -1.03% R1k Value +0.32% R1k Growth -2.93% R2k Value +0.09% R2k Growth -2.06% FANG+ -3.67% Semis -9.83% Software -1.66% Biotech +0.16% Regional Banks +1.06% SPX GICS1 Sorted: Cons Staples +2.85% Healthcare +2.19% Fin +1.14% REITs +1.0% Cons Disc +0.3% Materials +0.07% Energy -0.74% Comm Srvcs -0.81% Indu -1.32% SPX -1.46% Utes -2.33% Tech -5.58% |
| USD HY OaS |
| All Sectors +9.0bp
to 303bp All Sectors ex-Energy +8.3bp to 287bp Cons Disc +9.7bp to 245bp Indu +6.9bp to 227bp Tech +10.0bp to 311bp Comm Srvcs +14.3bp to 490bp Materials +9.0bp to 278bp Energy +8.5bp to 283bp Fin Snr +5.0bp to 263bp Fin Sub +2.9bp to 193bp Cons Staples +8.0bp to 269bp Healthcare +6.8bp to 375bp Utes +10.1bp to 222bp * |
| Date | Time | Description | Estimate | Last |
|---|---|---|---|---|
| 1/28 | 8:30AM | Dec P Durable Gds Orders | 0.6 | -1.2 |
| 1/28 | 10AM | Jan Conf Board Sentiment | 105.85 | 104.7 |
| 1/29 | 2PM | Jan 29 FOMC Decision | 4.5 | 4.5 |
| 1/30 | 8:30AM | 4Q A GDP QoQ | 2.7 | 3.1 |
| 1/31 | 8:30AM | Dec PCE m/m | 0.3 | 0.1 |
| 1/31 | 8:30AM | Dec Core PCE m/m | 0.2 | 0.11 |
| 1/31 | 8:30AM | Dec PCE y/y | 2.6 | 2.4 |
| 1/31 | 8:30AM | Dec Core PCE y/y | 2.8 | 2.81774 |
| 1/31 | 8:30AM | 4Q ECI QoQ | 0.9 | 0.8 |
| 2/3 | 9:45AM | Jan F S&P Manu PMI | n/a | 50.1 |
| 2/3 | 10AM | Jan ISM Manu PMI | 48.9 | 49.2 |
MORNING INSIGHT
Good morning!
Deepseek’s release of its AI model sent investors into a panic, but we list reasons why this is overblown.
Click HERE for more.
TECHNICAL
- SPX’s Monday selloff has brought prices to within striking distance of support.
- Semiconductor weakness doesn’t yet seem complete; software likely to outperform.
- Dollar/Yen (USD/JPY) likely has begun a large selloff.
Click HERE for more.
CRYPTO
We do our best “AI expert” impression, explore how increased model efficiency impacts bitcoin miners, dive into the intersection of crypto and AI, and explain why we believe this dip is worth buying.
Click HERE for more.
First News
If only someone could have foreseen China threatening U.S. artificial intelligence supremacy.
Oh wait, they did.
During his first term, President Trump implemented strict controls on technology-related exports to China, and he imposed limits on technology-related investments linked to China as well. President Joe Biden expanded on these controls significantly, and President Donald Trump is widely expected to continue this expansion during his last term.
Many criticized the effort as futile, with some warning that such actions could in fact spark larger leaps of progress in China, forcing Chinese scientists and engineers to get more creative and inventive. We saw signs of that in September 2023, when Huawei launched a smartphone powered by a homegrown 7-nm processor. Western controls were supposed to have made that nearly impossible.
Not everybody was surprised. Microsoft President Brad Smith told CNBC that “[…] people who don’t go to China too often assume that they’re behind. But when you go there, you’re impressed by how much they’re doing.”
Performance by DeepSeek’s AI model rivals – and in some ways, surpasses – those being developed by the likes of OpenAI, Google, and Meta. As the MIT Technology Review argued, “Rather than weakening China’s AI capabilities, the sanctions appear to be driving startups like DeepSeek to innovate in ways that prioritize efficiency, resource-pooling, and collaboration.”
Indeed, DeepSeek’s R1 model is more resource-efficient in several ways. DeepSeek reportedly used less advanced chips to develop R1. The startup’s approach also likely requires far less computing time to train: R1 figures weren’t immediately available, but its previous model, the V3, used about one tenth the “training compute” used by Meta’s Llama 3.1 405B. Notably R1’s operational cost per use is estimated between 2% and 3.7% that of OpenAI’s o1.
Yet does that mean the sky over Silicon Valley is falling? Not necessarily. DeepSeek claims it used Nvidia H800 chips, a less-advanced chip that until October 2023 could be legally exported to China, but regardless of whether it used H800s or smuggled, cutting-edge H100 chips, yesterday’s news could actually be seen as reinforcing the constructive thesis on Nvidia.
Also worth considering: Microsoft CEO Satya Nadella asserted yesterday that “Jevons paradox strikes again!” That’s a succinct way of arguing that DeepSeek’s advances in cost and efficiency could structurally increase demand for AI – a boon for tech companies all over the world, not just China. We will explore this idea in more detail in an upcoming FTM discussion about AI capex.