Stocks Post Solid Rebound Yesterday, FOMC Announcement And Earnings In Focus Today Stocks put in a solid showing yesterday. The Dow, which was up on Monday, added to its gains. The others, which were down on Monday, especially the Nasdaq and S&P 500, gained 2.03% and 0.92% yesterday, respectively. Those two were down roughly -3% and -1.5% on Monday. So, yesterday's gains didn't completely erase the prior day's losses. But they did make up a good chuck of them. News over the weekend concerning Chinese company DeepSeek's AI program, which has suddenly become a potential challenger to OpenAI's GPT models, weighed on stocks on Monday. Not because of the new competition, but because of the reported low development cost, which many have cited as being under $6 million. That figure was looked at quite skeptically when it was announced. But yesterday, the skepticism grew louder with many analysts estimating the true cost, once you factor in chips and servers and other expenses, as being significantly higher than the few million being quoted. Moreover, the worry that China would overtake the U.S. in A.I. is extremely premature, especially when the issue of adoption is considered. As I mentioned yesterday, Chinese social media app TikTok caused a stir over security concerns. The security risks using AI would be many times greater. And sure enough, yesterday afternoon, the U.S. Navy banned the use of DeepSeek due to "potential security and ethical concerns." It's warning members not to use it "in any capacity," which includes "for any work-related tasks or personal use." I expect to see more warnings and directives in the coming days and weeks. And not just from the U.S., but around the world. On the bright side, the Chinese model apparently was able to utilize the skill of Test-Time Scaling, which is a dynamic resource management process that the AI model can execute on its own, effectively conserving computational power when it's not needed for easier tasks, and deploying additional power for the more difficult tasks when it does. Even Nvidia's Jensen Huang complimented them on their use of that. The AI space is likely to only get more competitive as time goes on. But that's a good thing. In other news, yesterday's Durable Goods Orders declined by -2.2% m/m vs. last month's pace of -2.0% and views for 0.8%. Ex-Transportation it was up 0.3% vs. last month's -0.2% and estimates for 0.4%. Core Capital Goods rose 0.5% vs. last month's 0.9% and the consensus for 0.3%. The Richmond Fed Manufacturing Index improved to -4 from last month's -10. And Consumer Confidence slipped to 104.1 vs. last month's 109.5 and views for 106.3. Today we'll get MBA Mortgage Applications, Retail and Wholesale Inventories, and the Survey of Business Uncertainty. But what everybody is really waiting for is the FOMC Announcement on rates, and Fed Chair, Jerome Powell's, subsequent Press Conference. At the moment, Fed Funds traders have a 97.9% likelihood that the Fed will NOT cut rates this afternoon. What people will be listening for are any clues as to what the Fed might do at their next meeting in March (they don't meet in February), and beyond. We'll also have a busy day of earnings with 139 companies on deck to report, including 3 of the Magnificent 7 stocks, with Microsoft, Meta and Tesla reporting after the close. (Apple, another one of the Mag 7 stocks, reports on Thursday.) Plenty of market-moving news on tap for today. We'll see if the market can build upon yesterday's rebound. See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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