Stock Market Update Wednesday January 5, 2025 Stocks made a strong recovery from an early dip, closing at their highest points of the day, with the S&P 500 rising by 0.4%. The market showed its strength by ignoring disappointing earnings reports from AMD and GOOGL, continuing its upward trend after news related to tariffs. Volatility measures also indicated this change in sentiment, with the VIX dropping from over 20 on Monday morning to below 16, suggesting a significant decrease in risk premiums. If stocks maintain their strength as the week ends, especially after Friday's Jobs Report, implied volatility may decrease further. This could lead to a more stable environment for index options, promoting a slow and steady rally with less fluctuation in prices both within the day and from one day to the next. While broader economic factors continue to influence the market, the short-term technical setup will be important in determining market behavior.
Away From Stocks: The fixed-income market also showed a risk-on attitude, as Treasury yields remained low, with the 10-year yield falling by nine basis points to 4.43%, its lowest closing level of 2025. In contrast, commodities and digital assets showed significant differences in performance. WTI crude oil continued to decline, settling at $71 per barrel, while gold maintained its upward trend, rising to $2,863 per ounce. Bitcoin remained above $97,000, recovering from a sharp drop overnight. With the VIX falling below 16, attention is now focused on upcoming economic data and corporate earnings to see if the current risk-on sentiment can continue or if volatility might return in the near future.
Despite recent geopolitical developments and the deep-seek R1, the market has proven resilient and is steadily recovering. This underscores the value of data-driven, evidence-based research. As anticipated, the markets overreacted on Monday, presenting a potential buying opportunity.