Stocks Regain Footing After DeepSeek Shock; Markets Awaiting FOMC Decision Later Wednesday; Trump Offers Buyouts to 2 Million Federal Employees

Stocks rallied Tuesday, clawing back some of the losses suffered Monday, as analysts weighed the effects China's DeepSeek AI model would have on business plans.

While DeepSeek didn't completely implode the subscription-based models of Microsoft, Google, and others, it certainly caused some thoughts of downsizing, especially in the power consuption area. What may be more affected than tech stocks are energy and nuclear-related issues, as the DeepSeek model may be adopted and adapted by American firms, requiring less energy than previously considered.

There's no doubt that China and the U.S. are going to lock in on an AI arms race, with the end result likley to be somewhat of a tie.

Stocks may be taking a breather in advance of today's FOMC rate policy announcement, though expectations are for the Fed to stand pat at 4.35-4.50% on the federal funds rate.

Late Tuesday, the White House stunned again by offering all two million federal employees early retirement buyouts with eight months severace as the main driver. While government unions, especially AFGE, have already voiced opposition, rank and file workers may be considering the president's offer as the alternative could be being fired for cause or having entire departments shuttered and employees furloughed with no severance in a Reduction in Force (RIF) operation, over which federal unions have little bargaining power.

Money Daily believes that 10-20% of the federal workforce will take the deal and move on, resulting in an immediate increase in the unemployment rate of maybe as much as two percent, but also a quick infusion of cash to the economy, as early retirees will recieve lump-sum payments from the government.

With the opening bell just moments away, stock futures have been declining for the better part of the last hour, sending Dow futures down by 90 points, S&P futures off 20, and NASDAQ futures essentially flat.

Earnings reports from Logitech (LOGI), SAP (SAP), Chubb (CB), and LendingClub (LC) after Tuesday's close, and Teva Pharmaceuticals (TEVA), Progressive Insurance (PGR), General Dynamics (GD), ADP (ADP), T-Mobile (TMUS), ASML (ASML) this morning have failed to impress.

Gold and silver are pricing higher, crude oil continues to slide, holding around $73.25 currently, but more activity will be after the Fed's 2:00 pm ET announcement.

At the Close, Tuesday, January 28, 2025:
Dow: 44,850.35, +136.77 (+0.31%)
NASDAQ: 19,733.59, +391.75 (+2.03%)
S&P 500: 6,067.70, +55.42 (+0.92%)
NYSE Composite: 19,970.63, -9.37 (-0.05%)