
1. Weekly closing data of major indices
Compared to January 24, 2025, the major indices experienced mixed performance with notable volatility shifts:
Dow Jones Industrial Average (DOW): 44,544.7 (+0.27%)
NASDAQ 100 (NDX): 21,478.05 (-1.36%)
Russell 2000 Index: 2,287.69 (-0.87%)
Philadelphia Semiconductor Index (SOX): 5,015.85 (-6.10%)
S&P 500 Index (SPX): 6,040.53 (-1.00%)
CBOE Volatility Index (VIX): 16.43 (+10.64%)
VXX (Short-Term Futures ETN): 44.12 (+5.70%)
VXZ (Mid-Term Futures ETN): 50.91 (+2.37%)
2. Key developments of the week
AI market disruption: The "DeepSeek Shock"
At the beginning of the week, markets were rattled by the "DeepSeek Shock" following the unexpected success of Chinese AI startup DeepSeek, whose AI Assistant quickly surpassed ChatGPT as the top free app on the U.S. iOS App Store. This development sparked a sharp sell-off in tech stocks, particularly in the semiconductor sector, as investors grew concerned about the future demand for high-end microchips. Key stocks affected included Nvidia, ARM, Super Micro, Taiwan Semiconductor, ASML, AMD, and Broadcom, causing widespread volatility in tech-heavy indices.
3. Geopolitical Environment
Middle East Developments:
Gaza ceasefire negotiations:
On January 31, 2025, Hamas released three hostages, including Israeli-American Keith Siegel, as part of an ongoing ceasefire agreement. In exchange, Israel freed 183 Palestinian prisoners. This marked the fourth exchange under the six-week truce plan, with goals to release 33 hostages and nearly 2,000 prisoners in total.
Upcoming U.S.-Israel talks:
Israeli Prime Minister Benjamin Netanyahu will meet with U.S. Envoy Steve Witkoff on February 3, 2025, in Washington, D.C., to discuss the next phase of the Gaza ceasefire and strategies for securing the release of remaining Israeli hostages.
Protests in Rafah:
Tensions escalated at the Rafah border crossing after President Trump proposed relocating Gazans to Egypt and Jordan, a plan firmly rejected by both countries, sparking protests and raising concerns over regional stability.
Ukraine-Russia War developments:
U.S. ceasefire and election proposal:
The U.S. proposed that Ukraine hold elections by the end of 2025, contingent on a ceasefire with Russia. Ukrainian officials criticized the plan as insufficient without additional security guarantees to prevent future Russian aggression.
Zelenskyy’s concerns over exclusion from talks:
Ukrainian President Volodymyr Zelenskyy expressed frustration over being excluded from U.S.-Russia discussions, calling it "very dangerous" and advocating for Ukraine's direct involvement in negotiations.
Trade Developments:
U.S. tariffs announcement:
On January 31, 2025, President Trump imposed new tariffs on imports from Canada, Mexico, and China, citing national security concerns. The tariffs include a 25% duty on Canadian and Mexican goods and a 10% levy on Chinese imports. In retaliation, Canada and Mexico announced tariffs targeting key U.S. exports, intensifying fears of a renewed trade war.
4. Economic indicators and central bank actions
Federal Reserve (FOMC) Meeting:
The FOMC met during the week, keeping interest rates unchanged. However, markets remain sensitive to future policy signals, especially in light of trade tensions and tech sector volatility.
5. Earnings Reports (January 27–31, 2025)
Microsoft (MSFT) – January 29:
Reported revenue of $69.6 billion (+12% YoY) and net income of $24.1 billion (+10%). However, Azure’s 31% growth missed expectations, causing the stock to fall 6.2%.
Apple (AAPL) – January 30:
Surpassed earnings expectations, driving a 2% stock gain.
Meta Platforms (META):
Stock surged 18% after reporting strong earnings, fueled by growth in AI-driven advertising.
6. Upcoming earnings (February 3–7, 2025)
February 4:
Alphabet Inc. (GOOGL) – Focus on ad revenue and cloud growth.
Advanced Micro Devices (AMD) – Semiconductor performance under scrutiny post-DeepSeek shock.
PayPal (PYPL) – Monitoring transaction volumes amid fintech competition.
Pfizer (PFE) – Insights into drug pipeline and sales.
February 5:
Walt Disney (DIS) – Focus on streaming growth (Disney+).
Uber (UBER) – Mobility and delivery segment performance.
February 6:
Amazon (AMZN) – Holiday season sales, AWS growth.
Eli Lilly (LLY) – Pharmaceutical updates.
7. Upcoming economic data releases
JOLTS Report (Feb 4): December job openings data.
ISM Services Index (Feb 5): Service sector growth insights.
Nonfarm Payrolls (Feb 7): Expected to show +170,000 job additions for January.
8. Market sentiment and volatility analysis
The "DeepSeek Shock" triggered a sharp correction in tech and semiconductor stocks, amplifying market volatility early in the week.
Rising geopolitical tensions in the Middle East and renewed trade disputes between the U.S., Canada, Mexico, and China added to uncertainty.
Despite strong earnings from companies like Meta and Apple, tech remains vulnerable due to AI-driven disruptions and potential regulatory risks.
VIX Outlook for the Week of February 3, 2025
The VIX forecast for the upcoming week suggests a moderately elevated volatility environment, with consistent expectations of heightened market fluctuations. Market participants should remain vigilant, as both systemic risks and macroeconomic factors may influence volatility levels.
Forecast Summary:
· Expected VIX Level: 25.65 (Scenario Analysis:
· (VIX < 20): ~25% probability
o While possible, this scenario appears less likely given the persistent elevated baseline. It would require a combination of unexpectedly positive economic data, easing geopolitical tensions, and strong corporate earnings reports to trigger a sharp decline in volatility.
· (VIX 20-30): ~50% probability
o This is the most probable scenario, consistent with the current forecast. The stable yet elevated VIX suggests markets are pricing in ongoing uncertainty, possibly tied to upcoming economic data releases, central bank policy expectations, and lingering geopolitical risks without any immediate crisis trigger.
· (VIX > 30): ~25% probability
o This scenario reflects the risk of sudden market shocks, such as unexpected inflation surges, central bank policy surprises, or sharp geopolitical escalations. The stable forecast implies these risks are latent but not currently anticipated as imminent by the market.
This report is for informational purposes only and does not constitute financial, investment, or trading advice. Market conditions can change rapidly, and this report reflects data available as of January 31, 2025.
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