Stock Market Update

The S&P 500 futures are down 134 points and are trading 2.2% below fair value, the Nasdaq 100 futures are down 830 points and are trading 3.8% below fair value, and the Dow Jones Industrial Average futures are down 322 points and are trading 0.7% below fair value.

Contracts linked to the S&P 500 and Nasdaq 100 are sharply lower and futures tied to the Dow industrials are down ahead of the open. 

Some froth is being rung out of AI-related names after China's DeepSeek R1 release was "on par" with OpenAI's ChatGPT and Bloomberg reported that the model could be more cost effective and run on chips that are less advanced. 

NVIDIA (NVDA) is among the influential names impacted by the developments, trading 12% lower ahead of the open.

Treasury yields are noticeably lower, reflecting some flight to safety as equities sink. The 10-yr yield is 11 basis points lower at 4.52%.

Earnings season picks up steam this week with Apple (AAPL), Microsoft (MSFT), Meta Platforms (META), Amazon.com (AMZN), and Tesla (TSLA) reporting results.

There is also an FOMC meeting to get through and the market expects the target range for the fed funds rate to remain unchanged at 4.25-4.50%.

Today's economic lineup features the December New Home Sales report at 10:00 ET.

In corporate news:

• NVIDIA (NVDA 125.89, -16.75, -11.7%): sliding along with other AI names after China's DeepSeek model was released and Bloomberg reported it may be most cost effective and run on less advanced chips
• U.S. Steel (X 36.79, -0.62, -1.7%): reiterates commitment to maximizing value for stockholders; issues statement in response to Ancora; Ancora Nominates Majority Slate of Director Candidates and Proposes Industry Legend Alan Kestenbaum as New CEO to Turn Around U.S. Steel
• AT&T (T 23.23, +0.51, +2.2%): beats by $0.05, misses on revs; guides FY25 EPS below consensus
• Amazon (AMZN 223.84, -11.01, -4.7%): aiming to speak with Quebec governments about operation shutdowns, according to WSJ 

Reviewing overnight developments:

• Equity indices in the Asia-Pacific region had a mixed start to the week. Japan's Nikkei: -0.9%, Hong Kong's Hang Seng: +0.7%, China's Shanghai Composite: -0.1%, India's Sensex: -1.1%, South Korea's Kospi: HOLIDAY, Australia's ASX All Ordinaries: HOLIDAY.
  • In economic data:
    • Japan's November Leading Index 107.5 (expected 107.0; last 109.1) and Coincident Indicator -1.4% m/m (expected -1.5%; last 2.8%)
    • China's January Manufacturing PMI 49.1 (expected 50.1; last 50.1) and Non-Manufacturing PMI 50.2 (last 52.2)
    • Hong Kong's December trade deficit $34.5 bln (last deficit of $43.4 bln) December Imports -1.1% m/m (last 5.7%) and Exports 5.2% m/m (last 2.1%)
    • Singapore's Q4 Unemployment Rate 1.9% (last 1.9%)
  • In news:
    • Markets in Australia and South Korea were closed for holidays.
    • South Korea's market will remain closed through Thursday while markets in China will be closed through next Monday in observance of the Lunar New Year.
    • China's Manufacturing PMI (49.1) dipped into contractionary territory for the first time since September.
    • Bank of Japan Governor Ueda said that there is no preset idea regarding future rate adjustments and that the neutral rate is a long way from being achieved.
• Major European indices trade in the red amid pressure on overall risk sentiment after a Chinese start-up published an AI-model that appears to be less resource-intensive than alternatives like ChatGPT. STOXX Europe 600: -0.5%, Germany's DAX: -1.0%, U.K.'s FTSE 100: -0.2%, France's CAC 40: -0.7%, Italy's FTSE MIB: -0.1%, Spain's IBEX 35: +0.1%.
  • In economic data:
    • Germany's January ifo Business Climate Index 85.1 (expected 84.9; last 84.7). January Current Assessment 86.1 (expected 85.4; last 85.1) and Business Expectations 84.2 (expected 84.2; last 84.4)
    • France's December jobseekers 2.957 mln (last 2.935 mln)
  • In news:
    • European Central Bank President Lagarde complained that maintaining price stability could be more difficult due to increased volatility.
    • Discount air carrier Ryanair is meeting a positive reaction to its Q3 results despite cautious guidance due to Boeing delivery delays.