Market Monitor February 4th

Wall Street: Spotify and Palantir Surge Higher, Alphabet’s Capital Spending Concerns Investors

U.S. stock markets closed higher on Tuesday, with Palantir and Spotify soaring after strong earnings reports. The Dow Jones gained 0.3%, and the Nasdaq rose 1.4%. Investors were reassured by the delay of Trump-era tariffs for Canada and Mexico, fueling hopes for broader trade agreements to avoid steep tariff hikes.

Tech stocks performed particularly well, with Apple, Amazon, and Nvidia gaining around 2%. This was driven not only by trade relief but also by signs of a cooling U.S. labor market, as job openings dropped significantly in December.

Palantir surged 24% after exceeding expectations, prompting analysts at Morgan Stanley and Jefferies to raise their price targets. However, some analysts noted that its full-year revenue guidance fell short of prior projections.

Spotify jumped 13% after reporting its first-ever annual profit of over €1 billion. Despite price hikes, customer retention remained strong, and JPMorgan highlighted growth in monthly active users and investments in audiobooks and video podcasts as key drivers.

Alphabet announced plans for $75 billion in capital expenditures in 2025, focusing on AI infrastructure, causing its stock to drop 7% in after-hours trading. While Q4 earnings per share exceeded expectations, revenue growth fell slightly short. Ad sales, particularly from YouTube and search ads, were strong, partly driven by political ad spending.

The significant increase in investment—far above Wall Street estimates—raised concerns, especially as Chinese AI competitor DeepSeek is advancing with a much lower budget. Alphabet’s CFO justified the spending, citing high demand for AI services, while CEO Sundar Pichai remained confident in Google’s competitive edge in AI and search.

Market Overview

• The S&P 500 (SPY) gained +0.67%, continuing its uptrend. Short-term trends remain positive, with a 1-month gain of +1.66% and a 12-month performance of +20.07%.

• The Nasdaq-100 (QQQ) rose +1.2%, maintaining strong momentum. Over the past 6 months, it is up +16.44%.

• The Russell 2000 (IWM) advanced +1.4%, showing signs of recovery, but the 3-month trend is still negative (-4.7%).

Sector Performance

1-Week Performance:

• The worst-performing sectors include Consumer Discretionary, Real Estate, and Industrials.
• The best-performing sectors are Energy, Information Technology, and Materials.

1-Month Performance:

• Technology, Consumer Staples, and Health Care struggled.
• Materials, Financials, and Communication Services showed strength.

3-Month Performance:

• Real Estate and Consumer Staples remain weak.
• Industrials, Energy, and IT are leading gains.

All info available on our Sector Performance page

Market Breadth

• 73.9% of stocks advanced, while 23.6% declined.
• Short-term moving averages (SMA 20+) show 63.3% of stocks above their levels, indicating strength.
• However, only 51.8% of stocks are above their 200-day moving average, suggesting some long-term resistance.

All info available on our Market Monitor page

Key Takeaways

• The overall market remains bullish, led by large-cap technology and growth stocks.
• Small-cap stocks (Russell 2000) are showing some recovery, but the trend is still mixed.
• Market breadth remains solid, supporting continued upward momentum.
• Sector rotation is ongoing, with strength in Energy, Materials, and Industrials, while Real Estate and Consumer Staples lag behind.