Wall Street Daily (January 24): Significant divergence in US stock movements on Friday. S&P and Nasdaq edged up slightly, while Russell small-cap stocks plunged; the performance gap among tech giants widened, and gold hit another all-time high.

[Summary] Significant divergence in US stock movements on Friday. The S&P 500 Index barely closed flat with a slight increase of 0.03%; Nasdaq rose by 0.28%, slightly pushed higher by large-cap tech stocks; Dow Jones fell by 0.58%, mainly dragged down by investment bank stocks. The Russell 2000 small-cap index plummeted by 1.82%, ending a streak of outperforming the broader market for 15 consecutive days (the longest since 1996). Seven major tech ETFs dropped by 1.13% over two weeks, with widening internal disparities. Meanwhile, semiconductor leaders' Q1 guidance fell short of expectations, leading to a cooling of risk appetite. In terms of major asset classes, crude oil surged by 2.70% back to $61, gold climbed by 1.05% to set another record high (up nearly 8% this week, marking the best weekly performance since 2020), the US Dollar Index fell by 0.82%, and Bitcoin was flat with a slight rise of 0.05%.

I. Major Events

1. Trump warned that the US 'fleet' is heading toward Iran, sharply escalating tensions in the Middle East.

Trump announced on his way back from Davos that a 'fleet,' including the USS Abraham Lincoln carrier strike group, is heading towards Iran, warning that if Iran continues executing protesters, the US will launch military strikes - the death toll from the crackdown has now exceeded 5,000 people. Iran's Revolutionary Guard responded by saying the US should not 'miscalculate.'

Markets immediately priced in geopolitical risks: crude oil surged by 3.23%, and gold continued to hit new record highs.

Intel plummeted 16% as Q1 supply chain guidance disappointed

Intel's Q4 revenue of $13.7 billion and EPS of $0.15 both exceeded expectations, but its Q1 guidance was notably weak: revenue guidance of $12.2 billion fell short of the market expectation of $12.6 billion, with an EPS guidance at zero.

The company provided a more direct explanation. CEO Lip-Bu Tan admitted that yield issues with the Diamond Rapids processor prevented the company from fulfilling backlogged orders from cloud service providers. As a result, the stock price plummeted, marking the largest single-day drop since August 2024. However, during the same period, NVIDIA and AMD rose against the trend, indicating that investors are not treating the 'same sector' uniformly and are instead re-pricing individual stocks based on fundamentals.

Michigan Consumer Sentiment Final reading exceeded expectations

The University of Michigan's Consumer Sentiment Index final reading for January was revised up to 56.4 (from an initial reading of 54.0 and previous reading of 52.9), rising for the second consecutive month and reaching the highest level since August. One-year inflation expectations dropped to 4.0% (from 4.2%), the lowest since January 2025. Long-term inflation expectations slightly increased from 3.2% to 3.3%.

II. Major Trends

Small-cap stocks sharply reversed

The Russell 2000 (IWM) plummeted by 1.85%, recording the largest single-day drop in six weeks and ending a streak of outperforming the S&P 500 for 15 consecutive days. However, from a longer-term perspective, the trend remains intact — over a three-month horizon, IWM still gained 7.82%, significantly outpacing SPY's 2.90%. This pullback appears to be a combination of short-term profit-taking and style rotation rather than confirmation of a trend reversal.

Value style still dominates

Over a three-month horizon, SPYV gained 4.13%, continuing to outperform SPYG's 1.89%. Industrial stocks (DIA) rose 5.46% over three months, while tech stocks (QQQ) only increased by 2.12% during the same period. Even though the Nasdaq outperformed the Dow on the day, over a longer cycle, the dominance of value investing remains unshaken.

Tech giants show accelerating divergence internally

The MAGS ETF is still down 1.13% over two weeks, with the short-term weakness continuing. However, the disparity in strength within M7 is widening – Microsoft rose 3.28% on the day, while Alphabet fell 0.73%. Capital is rotating rapidly within large-cap technology stocks, and structural market characteristics are becoming more prominent.

III. Market Sentiment

The fear gauge ticked up slightly. The VIX Fear Index rebounded by 2.88% to 16.09, ending a sharp decline over the previous two days. Rising geopolitical risks in the Middle East, combined with guidance impacts from semiconductor leaders, added new uncertainties to the market. Nevertheless, the VIX remains significantly below Monday's high of 20.09, and overall sentiment cannot be described as 'fear-driven'.

The CNN Fear & Greed Index edged down from 53 to 52, continuing to fluctuate narrowly within the 'neutral' range.

Fundamental data continues to provide some support to the market. Notably, US equities saw net outflows of approximately $17 billion this week, and the S&P 500 faced its first back-to-back weekly decline since June 2024.

IV. Market Scan

1. Index ETFs

The Nasdaq 100 ETF (QQQ) rose 0.32%, making it one of the few index ETFs showing relative strength, primarily driven by large-cap tech stocks such as Microsoft and NVIDIA. The Russell 2000 ETF (IWM) plummeted 1.85%, ending its historic streak of outperforming the broader market for 15 consecutive days. The divergence between the Dow Jones and Nasdaq continues, with clearer signs of capital flowing back into large-cap tech from small caps and certain cyclical sectors.

2. Industry Sectors

Materials (XLB) led gains with a 0.91% rise, supported by a weaker dollar and higher commodity prices providing tailwinds to the sector. Financials (XLF) lagged with a 1.38% drop, as Goldman Sachs fell about 4% (due to lingering effects of lower-than-expected Q4 revenue) and Capital One declined 3%-4% (after announcing a $5.15 billion acquisition of Brex), weighing heavily on the sector. Energy also strengthened, with rising tensions around Iran pushing oil and gas stocks higher.

3. Seven Major Tech Stocks

M7 dispersion persists. Microsoft (MSFT) surged 3.28% to lead the pack, with UBS maintaining a Buy rating and a $600 price target. Positive developments in AI data center expansion and earnings expectations have made it a focal point for capital allocation. Netflix (NFLX) gained 3.09%, as Paramount/Skydance's $108 billion hostile bid for Warner Bros may ease pricing pressure on Netflix. Alphabet (GOOG) fell 0.73%, lagging relatively behind.

4. Chinese概念股

Chinese ADRs showed divergent performances. Tencent Music (TME) led gains with a 4.74% increase, boosted by AI-related concepts and institutional buying in China’s music entertainment sector. Alibaba (BABA) fell 2.23%, experiencing profit-taking after a 5.05% surge the previous day, with AI-related enthusiasm also cooling somewhat.

5. Cryptocurrencies and related stocks

Bitcoin was last quoted at approximately $89,567, up 0.05%, remaining volatile amid geopolitical tensions and diverging risk appetites. Palantir (PLTR) rose 2.23%, catalyzed by signing a 'hundreds of millions of dollars' data center contract with South Korea’s Hyundai and receiving an upgrade to Buy with a $235 price target from Citi. Coinbase (COIN) dropped 2.77%, reflecting ongoing weakness in the cryptocurrency market, with cumulative losses of about 12% this week.

$NASDAQ 100 Index (.NDX.US)$ $Invesco QQQ Trust (QQQ.US)$ $Dow Jones Industrial Average (.DJI.US)$ $State Street® SPDR® Dow Jones Industrial Average® ETF Trust (DIA.US)$ $Russell 2000 Index (.RUT.US)$ $iShares Russell 2000 ETF (IWM.US)$ $Roundhill Magnificent Seven ETF (MAGS.US)$ $USD (USDindex.FX)$ $U.S. 10-Year Treasury Notes Yield (US10Y.BD)$ $iShares 20+ Year Treasury Bond ETF (TLT.US)$ $XAU/USD (XAUUSD.CFD)$ $CBOE Volatility S&P 500 Index (.VIX.US)$ $Bitcoin (BTC.CC)$ $BTC/USD (BTCUSD.CC)$ $Ethereum (ETH.CC)$ $ETH/USD (ETHUSD.CC)$ $iShares Ethereum Trust ETF (ETHA.US)$ $NVIDIA (NVDA.US)$ $Tesla (TSLA.US)$ $Meta Platforms (META.US)$ $Amazon (AMZN.US)$ $Alphabet-C (GOOG.US)$ $Microsoft (MSFT.US)$ $Apple (AAPL.US)$

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