VIDEO: 3 Big Things That Will Really Impact the Market This Week
Chis details the items that will influence stocks and Fed rate-cut timing over the next five trading days as well as what portfolio names are on our radar.
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In today’s Daily Rundown, Chris Versace lays out the items poised to influence the stock market this week as well as Fed rate-cut timing expectations. We start with Taiwan Semiconductor’s TSM March-quarter guidance update and Foxconn’s January revenue report, which are the latest supportive data points for several TheStreet Pro Portfolio holdings.
Meanwhile, the market is waiting for President Trump to announce reciprocal tariffs he telegraphed late last week. As we get those particulars, we’ll also be watching to see how targeted countries respond. Mid-week brings Fed Chair Powell’s latest congressional testimony that will bookend the January CPI report. We explain why that could lead to a more hawkish tone from the Fed Chair. We’ll also be closely following his comments on tariffs and any potential impact on monetary policy.
Rounding out today’s video, Chris shares which earnings reports the portfolio will be digging into and how we’ll be using their comments to update our thinking.
Transcript
CHRIS VERSACE: Hey, everyone. Chris Versace here Monday, February 10. You've watched the super bowl. You've seen the outcome. You've probably seen a whole bunch of new commercials as well. And quite possibly, you've had too much dip, too many nachos, whatever. Here's the thing. While folks still recover from the big game last night, we are going to get ready for the week ahead. There are about three, what I would say, really big items that are coming at us in the next several days that will really influence the market.
And as we talked about in Friday's roundup, the market is already dealing with investor sentiment flashing fear, according to the fear and greed index. So what are these three items that we're going to be paying close attention to this week? Reciprocal tariffs, the January CPI and PPI data that's going to be bookended by Fed Chair Powell's latest testimony, and yes, more earnings. But before we dig into those three things, there are two items that I want to quickly discuss that are developing this morning. The first is Taiwan Semiconductor coming out and saying that their March quarter revenue could be at the lower end of its previously issued guidance.
Now, here's the thing. Is this demand-related? Doesn't appear to be. It really appears more to be tied to an earthquake that happened in January. And knowing that, let's take a look at this revised range, if you will. So they came out and they said with their December quarter earnings targeting 25 to 25.8 billion in revenue in the March quarter-- lower end of that, let's call it 25 billion-- well, year over year basis, that's still up more than 30% from the 18.9 billion that they delivered in the March 2024 quarter.
So yeah, it may not be as strong as some folks were expecting. And yes, Taiwan Semiconductor says they're going to try and make up the production shortfall. But the reality is that even at the lower end of the range, the demand remains robust. And that really brings us to the second part of what's kind of developing this morning. And that is January revenue out of Foxconn, also known as Hon Hai. You know we pay close attention to this because of their comments about AI and AI servers, but also other devices, including smartphones.
But what they said was that their January revenue was up 3% year over year. And we have to remember, the timing for Chinese new year kind of impacted that a little bit. So I would argue that the demand was probably stronger than the actual revenue numbers showed. Again, let's think about those figures coming out of Taiwan Semiconductor. But with Foxconn, where was the strength? It was in, yes, AI servers.
So I think when we put these comments together and we reflect on the big tech capital spending dollars that have been announced for 2025, predominantly AI data center, we put all of these together, and these comments as well from Taiwan Semiconductor and Foxconn, are very, very supportive for the positions that we have in Nvidia, obviously, but Marvell as well, to a lesser extent, I would argue Eaton, as well as our other construction names.
Now let's turn to those three things that are likely to be driving the market this week. First, reciprocal tariffs. No surprise, late on Friday, President Trump said he would be unveiling some reciprocal tariffs sometime this week. Over the weekend, we heard some news, noise, if you will, about steel and aluminum. So we'll have to see what those formal announcements are.
But we're also going to be paying close attention to what any responses are from the countries that these reciprocal tariffs are being placed on. As we get more of these details, we'll be in a better position to assess the true impact to the economy, to certain sectors of the economy and in the market and individual companies, including any potential impact on our holdings. And of course, as we make those determinations, we will make adjustments as necessary.
Second item that's going to be big this week is going to be Fed Chair Powell's back-to-back testimony Tuesday, Wednesday. Now Tuesday, I don't really think he's going to say much more than he already has. Remember at the last policy meeting, he said that the Fed was going to proceed very cautiously and that they would need to see sustained improvement toward the Fed's 2% target. Key word being "sustained." That's not one month. That's not two months-- multiple months. So as you know, we've continuing to-- we've continued, excuse me, to watch the data almost hawk-like.
And what we saw last week from the January PMI data, the wage data found in ADP's January employment report, as well as the wage data in the official January employment report, all point to inflation being rather sticky. So Tuesday, when he takes the podium at 10 o'clock, do I expect him to say anything demonstrably different than he has recently? No. What will be interesting are his comments on Wednesday. And the reason for that is Wednesday morning at 8:30 AM ET, we get the January CPI report. And it's expected to show core CPI trending higher on a sequential basis and a little bit on a year over year basis.
So if we see that, the question will be, Are Powell's comments poised to be a little more hawkish? And I think that they could be. He could simply reiterate the need to be seeing more good data on a sustained basis. But his tone might be a little more hawkish. So we'll be watching for that. We'll also be paying close attention over his two days of testimony about any initial thoughts the Fed chair is willing to share about tariffs and the potential implications not only on inflation and the economy, but potentially Fed policy as well.
So that's the second thing. Third, yes, we have more earnings. And as you've seen us doing over the last few weeks, from time to time, we have companies reporting. And we will, of course, be breaking those comments down. But other times, the week is filled with other companies that are not in the portfolio, but they may touch some aspect of the economy or the industries that we do have exposure to. So we do like to collect those data points and juxtapose them against what we've heard in recent weeks, so we can update our investment outlook as needed.
It's a great time to do it, but that's what we're doing as fresh information becomes available. So we'll be having more comments on that front. But in terms of some companies that we will be paying close attention to today, McDonald's is out. And it looks like a little bit of a shortfall. We'll want to see why that is. See what the comments are on input costs, pricing, overall demand. But over the next couple of days, we'll be hearing from Coca-Cola, GlobalFoundries. We'll be curious on their capital spending demands. When we get Marriott, Lyft, and DoorDash, we'll kind of smoosh them together, if you will, and get an update on the consumer. And that'll be interesting as it relates to MasterCard and American Express.
Kraft Heinz shows up later in the week. Again, what are the comments on food, input prices, margins, promotional spending, that sort of thing? And then we have like a confluence of companies from Equinix, Digital Realty Trust, Duke Energy and Granite Construction. With them, we'll be looking to see what is the updated outlook on capital spending from Equinix and Digital Realty Trust on data center construction? How does that play into energy demand? So that's the angle we'll be listening for with Duke Energy.
And then, of course, how does that construction tie into non-residential construction activity? We'll be giving a listen to what Granite Construction has to say, but reflecting back on all of our different exposures in the portfolio. So we do have a busy week. I would suggest please be sure to check your emails, your alerts. We want to make sure you're getting our latest thoughts. And of course, if we make any moves with the portfolio, we want you right there with us. Thanks for watching.
