Last week, the stock market witnessed a notable recovery amidst a mix of positive and concerning news. The Nasdaq composite managed to break its five-week losing streak, buoyed by significant gains in major technology stocks, including Meta Platforms, Nvidia, and Amazon. By the end of the week, the tech-heavy index had climbed 1.9%. Similarly, the S&P 500 rose by 1.1% during the holiday-shortened week, effectively halting a two-week downward trend.
A crucial factor driving this recovery was the Supreme Court’s ruling against former President Donald Trump’s emergency tariffs, which had been criticized for their scale and scope. The Court concluded that previous presidents had never invoked such powers and emphasized that Trump would need “clear congressional authorization” for any extraordinary tariff measures. Following the decision, the S&P 500 gained 0.7% on Friday, benefiting many consumer-facing companies previously burdened by elevated import costs.
Despite the surge, some stocks, like Nike, which anticipated a $1.5 billion tariff challenge this fiscal year, struggled to maintain gains as investors recognized that Trump might seek alternative avenues for imposing tariffs. Other consumer giants, such as Costco and Procter & Gamble, also faced impacts from the ruling.
In the tech sector, megacap stocks made a significant comeback. Meta announced a partnership with Nvidia to utilize its chips in data centers, resulting in price increases for both companies—Meta rose 2.5% and Nvidia 3.8% over the week. Amazon’s shares experienced a 5.6% increase as it was revealed that Bill Ackman’s Pershing Square had expanded its investment during the fourth quarter. Alphabet, which had lagged earlier in the week, rebounded to end up 3%, while Corning gained 4.5%, showing resilience in AI-related technology.
On the other hand, concerns surrounding private credit were exacerbated by troubled asset manager Blue Owl Capital, leading to significant volatility in financial stocks. Blue Owl’s decision to restrict withdrawals from its private debt fund caused its shares to plummet nearly 6% on Thursday. This prompted some analysts to label Blue Owl as a “canary in the coal mine” for the expanding private credit market. Major firms such as Ares Management, Apollo Global, Blackstone, and KKR all saw significant declines in their stock values. However, shares of BlackRock experienced only a minor drop of 1% on Thursday, recovering to finish the week up 2%.
In these turbulent times, Capital One was the only financial stock added to the portfolio, with a strategy shift that saw the exit of Danaher and Texas Roadhouse after disappointing earnings reports. The decision to sell Texas Roadhouse was influenced by its ongoing challenges with beef inflation.
As the market looks to maintain its rebound, analysts will be observing various factors, including potential tariff developments and ongoing volatility in private credit, as they gauge the outlook for the upcoming trading sessions.
