Overview of the Week

The stock market experienced a significant rally, marking the best week for the S&P 500 since the election. This surge was driven by positive perceptions of inflation trends and strong earnings results from major financial institutions. Political developments, such as a ceasefire agreement between Israel and Hamas and the upcoming presidential inauguration, also contributed to market optimism.

Despite a report from the Congressional Budget Office projecting a $1.9 trillion budget deficit for fiscal 2025, the market remained buoyant, aided by favorable December PPI and CPI reports that alleviated inflation concerns. Treasury yields fell, with the 2-year note yield dropping to 4.27% and the 10-year note yield to 4.61%, further fueling the stock market rally.

Sector Performances

• Financial Sector: Increased by 6.1%, buoyed by strong earnings from JPMorgan Chase (JPM), Goldman Sachs (GS, Financial), BlackRock (BLK, Financial), Wells Fargo (WFC, Financial), and Citigroup (C, Financial).
• Energy Sector: Rose by 6.1%.
• Materials Sector: Jumped by 6.0%.
• Industrials Sector: Climbed by 4.8%.
• Utilities Sector: Added 4.3%.
• Consumer Discretionary Sector: Increased by 4.0%.

Market Indices Performance

• S&P Midcap 400: +4.5% for the week / +3.8% YTD
• Russell 2000: +4.0% for the week / +2.1% YTD
• S&P 500: +2.9% for the week / +2.0% YTD
• Dow Jones Industrial Average: +3.7% for the week / +2.2% YTD
• Nasdaq Composite: +2.4% for the week / +1.7% YTD

Monday's Market Activity

The stock market opened the week on a mixed note. The Nasdaq Composite fell by 0.4%, while the S&P 500, Russell 2000, and Dow Jones Industrial Average posted gains. Rising market rates and inflation concerns contributed to a negative early market sentiment. However, the afternoon saw increased buying activity.

Notable stock movements included UnitedHealth (UNH, Financial) rising 3.9% due to a proposed increase in Medicare Advantage plan payments, while Moderna (MRNA, Financial) dropped 16.8% after revising its FY25 revenue outlook downward.

Tuesday's Market Activity

Tuesday saw a mixed session, with positive underlying market sentiment driven by cooler-than-expected inflation data. The December PPI readings indicated easing inflationary pressures, although year-over-year numbers were less favorable.

Small-cap stocks outperformed, leading to a 1.1% rise in the Russell 2000. Bank stocks continued to perform well, with the SPDR S&P Bank ETF (KBE) and the SPDR S&P Regional Banking ETF (KRE) gaining 3.3% and 3.4%, respectively.

Wednesday's Market Activity

The stock market rallied on Wednesday, supported by favorable inflation data from the December CPI report. The report showed a decrease in the year-over-year rate for core-CPI, contributing to a decline in Treasury yields.

Financial sector stocks, including JPMorgan Chase (JPM) and Citigroup (C, Financial), reached new 52-week highs due to better-than-expected earnings. The S&P 500 financial sector gained 2.6%, with strong performances also seen in consumer discretionary, communication services, and information technology sectors.

Thursday's Market Activity

Thursday's trade was mixed, with the Nasdaq Composite underperforming. Economic data and earnings reports provided mixed signals, while Treasury Secretary nominee Scott Bessent emphasized the need for fiscal responsibility and pro-growth policies.

Despite technical resistance, Morgan Stanley (MS) hit a new 52-week high following its earnings report. However, other companies like Bank of America (BAC) and US Bancorp (USB) traded lower despite positive earnings.

Friday's Market Activity

The stock market ended the week with a rally, driven by mega-cap leadership and growth optimism. Speculation around upcoming executive orders from President-elect Trump added to the market's positive sentiment.

Tesla (TSLA, Financial) and other mega-cap stocks led the charge, with the Vanguard Mega-Cap Growth ETF (MGK) rising 1.4%. The consumer discretionary, information technology, and communication services sectors outperformed, while real estate and health care lagged.

Guru Stock Picks

T. Rowe Price Japan Fund has made the following transactions:

• Reduce in TSE:6723 by 5.36%
• Sold out in TSE:7259
• Add in TSE:4202 by 25.48%
• New position in TSE:7012

T Rowe Price Equity Income Fund has made the following transactions:

• Reduce in D by 21.25%
• Sold out in BK
• Add in SRE by 2.76%
• New position in AGCO

Yacktman Fund has made the following transactions:

• Reduce in BRK.B by 17.65%
• Sold out in BKNG
• Add in COP by 22.47%

Yacktman Focused Fund has made the following transactions:

• Reduce in EBAY by 21.05%
• Sold out in BK
• Add in XKRX:012330 by 60.71%

Today's News

Intel (INTC, Financial) saw a significant rise of 9% following rumors of a potential takeover. Speculation includes Elon Musk as a possible buyer, according to a report from SemiAccurate. Citi analyst Christopher Danely expressed concerns about the outcome for Intel unless strategic changes are made. The takeover rumors have been circulating for months, adding intrigue to Intel's market movements.

The Federal Trade Commission (FTC) released a study highlighting concerns over partnerships between tech giants and AI developers. The report examined collaborations such as Microsoft (MSFT, Financial) with OpenAI, Amazon (AMZN, Financial) with Anthropic, and Google (GOOGL, Financial) with Anthropic. The FTC's findings suggest these partnerships could lead to the tech giants fully acquiring the AI developers, which could significantly impact the AI landscape.

Nvidia (NVDA, Financial) was ranked as the top stock among the "Magnificent Seven" by Jefferies, outperforming its peers based on growth, sentiment, and return on invested capital. Microsoft (MSFT, Financial) was placed at the bottom of the list. Nvidia's strong performance is attributed to its leadership in growth and valuation metrics.

Madrigal Pharmaceuticals (MDGL, Financial) experienced a 9.4% increase amid reports of advanced sale talks. Speculation suggests a U.S.-listed pharma company with a substantial market cap is interested in acquiring Madrigal. This follows previous reports of interest from large pharmaceutical companies seeking treatments for liver diseases.

Walmart (WMT, Financial) unveiled its new corporate campus in Northwest Arkansas, emphasizing sustainability and community development. The state-of-the-art facility represents a multibillion-dollar investment in associate experience and environmental leadership, with a phased opening planned through 2025.

Bank of America expressed optimism about PayPal (PYPL, Financial), McKesson (MCK), Antero Resources (AR), and East West Bancorp (EWBC), while adopting a bearish stance on Eli Lilly (LLY, Financial) and Target (TGT). The bank's analysis highlights potential growth opportunities and challenges for these companies.

Starbucks (SBUX, Financial) CEO Brian Niccol outlined strategic shifts in a letter to employees, focusing on enhancing the coffeehouse experience and marketing the brand's story. Starbucks aims to improve customer service, reduce wait times, and promote internal leadership growth.

Paramount Global (PARA, Financial) is reportedly considering settling a lawsuit filed by Donald Trump to ease tensions with the incoming administration. The lawsuit stems from a CBS News interview with Vice President Kamala Harris. Paramount's planned merger with Skydance may be affected by the political climate.

Robinhood Markets (HOOD) gained 3.8% after Morgan Stanley named it a top pick, citing growth potential not yet reflected in its valuation. Analyst Michael Cyprys noted opportunities in the crypto industry and potential regulatory changes that could benefit Robinhood.

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