WSJ What’s News: What’s News in Markets – AI Bloodbath, Trump and Schwab, UPS Doesn’t Deliver
Release Date: February 1, 2025
Host: Francesca Fontana, The Wall Street Journal

Introduction to the Week's Market Dynamics

Francesca Fontana opens the episode by highlighting the tumultuous week in the markets, encapsulated by a flurry of events including looming tariff threats, ongoing earnings season, Federal Reserve updates, and significant turbulence in the artificial intelligence (AI) sector. She remarks, "I'm sure I'm not alone in feeling like a month has passed since Monday" (06:00) to emphasize the rapid pace and intensity of the week's developments.

Earnings Season Successes

Despite the market's volatility, the earnings season delivered strong performances. Fontana notes that nearly 75% of S&P 500 companies that reported earnings exceeded Wall Street's forecasts, signaling robust corporate health amidst economic uncertainties. This positive trend provided a silver lining amid the week's mixed financial news.

Federal Reserve's Interest Rate Decision

The Federal Reserve made a pivotal move by halting interest rate cuts this week. Fontana explains, "The less good we are back to wait and see when it comes to the Fed, which hit the pause button on interest rate cuts this week, which weighed on the stock market Wednesday" (05:30). This decision introduced uncertainty into the markets, contributing to investor apprehension and influencing stock performances negatively.

AI Market Volatility and DeepSeek's Impact

A significant portion of the week's discussions revolved around the dramatic downturn in AI-related stocks. Fontana delves into the "AI bloodbath" that unfolded on Monday, triggered by the emergence of DeepSeek, a Chinese AI startup. She states, "DeepSeek is this Chinese startup similar to OpenAI, and its models are threateningly close to its US rival" (11:15). Unlike its American counterpart, DeepSeek operated with lower expenditures, relying on less advanced and more affordable chips, which sparked fears about the sustainability of heavy AI investments.

This downturn led to a massive $1 trillion loss in the stock market on Monday alone, with Nvidia's market value plummeting by over $500 billion. Fontana articulates the broader market's sentiment: "If all of this AI spending isn't as justified as everyone thought... we might think about all the problems it can solve and how fast it can solve them, and maybe less about how much energy the industry and all those data centers eat up." (12:50). This shift in investor focus from potential AI breakthroughs to their environmental and economic costs caused a ripple effect across multiple sectors.

Impact on Specific Stocks:

• Nvidia: Saw a dramatic decrease, losing more than $500 billion in market value.
• Vistra and Constellation Energy: Power producer stocks suffered significant losses, with Vistra dropping 28% on Monday and Constellation Energy falling 21%, ending the week down 14% (14:30).
• Magnificent Seven Members: Other leading tech stocks also faced considerable declines due to the AI sell-off.

Trump Media Ventures into Finance with TruthFi

Shifting focus to the intersection of media and finance, Fontana discusses Trump Media’s (DJT) foray into the financial sector. The company announced the launch of TruthFi, a new finance venture committing $250 million to cryptocurrency and other investments, managed by Charles Schwab. Fontana observes, "We've seen that the stock Trump Media has been volatile and back around the election we all got used to checking in on the so-called Trump trade" (08:45).

Despite a 6.8% surge in shares on Wednesday following the announcement, the stock experienced a net loss of 2.6% for the week. Fontana provides context, noting that aside from a notable spike before the inauguration, Trump Media's stock has remained relatively subdued since last November.

UPS's Revenue Concerns Amid Amazon Partnership Reduction

In the logistics sector, UPS faces significant challenges as it announced a strategic shift to phase out more than half of its business with Amazon by June 2026. Fontana explains, "UPS warned investors that its 2025 revenue is expected to take a hit as the company starts phasing out more than half of its business with Amazon by June 2026" (16:10). Despite Amazon being UPS's largest customer, the partnership has been strained due to tight margins impacting profitability.

As a result, UPS shares plunged by 14% on Thursday, reflecting investor discontent with the company's revenue outlook. Fontana underscores the gravity of the situation, stating, "Investors seem displeased with the revenue outlook, given that UPS shares fell 14% on Thursday and ended the week down 14% as well." (17:00).

Conclusion and Further Insights

Francesca Fontana wraps up the episode by directing listeners to her column, The Week's News in the Score, featured in the Wall Street Journal's Exchange section, for more detailed analyses of stock movements and market news. She acknowledges the complexity of the week's events and encourages listeners to stay informed through WSJ's comprehensive coverage.

Production Credits:

• Produced by: Anthony Banci and Zoe Culkin
• Supervising Producer: Michael Kosmides

Fontana concludes with warm wishes: "Have a great weekend and see you next." (19:00)

Key Takeaways

• Earnings Season: Strong performance with 75% of S&P 500 companies beating forecasts.
• Federal Reserve: Stopped interest rate cuts, adding uncertainty to the markets.
• AI Market Downturn: Triggered by DeepSeek's competitive edge, leading to a $1 trillion stock market loss.
• Trump Media's TruthFi: Entry into finance with significant investment in cryptocurrency, managed by Charles Schwab.
• UPS's Revenue Challenges: Reduction in Amazon partnership leading to a 14% drop in shares.

This episode of WSJ What’s News provides a comprehensive overview of the week's critical market events, offering valuable insights for investors and followers of financial trends.