8 Key Items Shaping the Stock Market Wednesday

These are the early headlines and other items poised to influence the market at the start of the trading Wednesday. As we share this collection of market drivers, U.S. equity futures across the board point to a modestly positive market open.

1. A new AI automation tool from Anthropic PBC sparked a $285 billion rout in stocks across the software, financial services and asset management sectors on Tuesday as investors raced to dump shares with even the slightest exposure. A Goldman Sachs basket of US software stocks sank 6%, its biggest one-day decline since April’s tariff-fueled selloff, while an index of financial services firms tumbled almost 7%. (Bloomberg)

We are in agreement with JPMorgan analyst Toby Ogg’s view that “We are now in an environment where the sector isn’t just guilty until proven innocent but is now being sentenced before trial…” What this means, and as we saw with the recent earnings report from ServiceNow  (NOW) , is better-than-expected results are not enough to drive shares of those companies higher. Ogg agrees with our view that they will need to continue to demonstrate convincing metrics over time, and that AI is a tailwind not a headwind. In the case of ServiceNow, it has partnered with Anthropic to include its models in the ServiceNow AI platform. 

We’ll have more to say on this later today.

2. Advanced Micro Devices Inc. shares tumbled in late trading after the chipmaker’s sales forecast underwhelmed investors, a sign that it’s not making the AI inroads that some on Wall Street anticipated. First-quarter sales will be roughly $9.8 billion, plus or minus $300 million, the company said in a statement Tuesday. Analysts had estimated $9.39 billion on average, but some projections topped $10 billion, according to data compiled by Bloomberg.

And yet….

3. Investors were pleasantly surprised on Tuesday by Super Micro’s Computer’s second-quarter earnings, as the maker of computer hardware topped Wall Street’s expectations and provided proof that some delayed orders from last year finally materialized. (MarketWatch) Super Micro’s outlook suggests it’s taking advantage of its strong position as a maker of servers that house the powerful chips running AI workloads… The company said it will have sales of at least $40 billion in the current fiscal year. It had previously forecast revenue of at least $36 billion. (Bloomberg)

In our view, this showcases the current market environment we’re in, and reaffirms comments we made weeks ago that companies will need to deliver head-and-shoulders beats for quarterly results and guidance. That includes, as we’re seeing with  (AMD) , the dreaded Wall Street whisper numbers. Connecting those two reports, however, Super Micro  (SMCI) , Dell  (DELL) , HP  (HPQ) , and others need chips to put in those servers.

4. Chipotle Mexican Grill (CMG.N) said on Tuesday it expected to raise menu prices this year as it wrestled with higher raw material costs and a tough labor market, and forecast margins would remain under pressure as customers pulled back on dining out amid ongoing economic uncertainty. (Reuters) Cadbury-parent Mondelez International (MDLZ.O) expects a subdued year ahead, as price increases are turning away cost‑conscious shoppers who are already wary of rising living costs and macroeconomic uncertainty. (Reuters)

Fodder for our Cash-Strapped Consumer investment theme, and reasons for us to remain long shares of Costco  (COST) , TJX  (TJX) , and Amazon  (AMZN) . Those headlines took some wind out of Dutch Bros  (BROS) , but improving dairy costs are a positive, and the continued footprint expansion remains the narrative to focus on.

5. Federal Reserve board member Stephen Miran has resigned from his position as chair of the White House Council of Economic Advisers, effective immediately. Miran had been on unpaid leave from his job as President Donald Trump’s chief economist since joining the central bank in September. His Fed term officially ended at the end of January, but he can stay indefinitely until the president nominates someone to his seat. (Politico)

If we didn’t know better, this seems like another plot for President Trump to attempt to strong-arm the Fed into delivering the lower interest rate environment he continues to clamor for. Recent December and January inflation data aren’t cooperating on that front, but let’s see what today’s January Service PMI from ISM has to say on that front.

6. The U.S. shot down an Iranian drone aimed at the aircraft carrier USS Abraham Lincoln, and a U.S.-flagged ship outran an attempt by armed Iranian gunboats to force it to stop, spiking tensions in the Persian Gulf. But back in Washington, White House press secretary Karoline Leavitt told reporters that U.S.-Iran talks were still scheduled. (WSJ)

All indications are talks are on track, but the risk pointed out by many is that Trump could lose patience and order a strike. The president has warned that Iran risks being attacked if it doesn’t agree to a deal to give up its nuclear program. Such a strike would inject a fresh round of uncertainty into a market that is far from oversold when it comes to the S&P 500 and the Nasdaq Composite. We’ll want to follow developments closely.

7. Economic data today per TipRanks: MBA Mortgage Applications Index (Weekly), ADP Employment Change Report (January), S&P Global Services PMI Report (Final – January), ISM Non-Manufacturing PMI Report (January), EIA Crude Oil Inventories (Weekly).

8. Companies reporting today per TipRanks: CME Group  (CME) , Eli Lilly  (LLY) , GE Healthcare  (GEHC) , Kennametal  (KMT) , New York Times  (NYT) , Stanley Black & Decker  (SWK) , Uber  (UBER) , Yum China  (YUMC) , Yum! Brands  (YUM) ; Alphabet  (GOOGL) , Coherent  (COHR) , e.l.f. Beauty  (ELF) , Omega Health  (OHI) , Qualcomm  (QCOM) , SiTime  (SITM) , Snap  (SNAP) .

At the time of publication, TheStreet Pro Portfolio was long GOOGL, SITM, NOW, COST, TJX, AMZN and BROS.