Stocks were mixed to start the first full trading week of 2025. While the Dow Jones Industrial Average outperformed on strength in UnitedHealth Group (UNH) shares, the Nasdaq Composite fell as tech stocks continued to decline.
At the close, the Dow was up 0.9% to 42,297 as UnitedHealth surged 3.9% after a release from the Centers for Medicare & Medicaid Services (CMS) suggested Medicare Advantage payments could potentially increase by more than 4% next year.
At roughly $545 a share, UnitedHealth has the greatest influence on the price-weighted Dow.
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Johnson & Johnson (JNJ) was also one of the top-performing Dow Jones stocks today, adding 1.7%, on news the pharmaceutical giant is buying neuroscience specialist Intra-Cellular Therapies (ITCI, +34.1%) for $14.6 billion in cash.
Jeff Jonas, portfolio manager at Gabelli Funds, is cautious on the deal, mostly due to antitrust concerns. "JNJ has a late-stage Depression drug and has always been a leader in Schizophrenia," he wrote in emailed commentary. "Yes, it's a different mechanism of action but still a lot of overlap. Their timing to close the deal of 'later this year' seems to incorporate a tough review, even under the new administration."
Nvidia drops on updated AI chip rules
The S&P 500 managed to add 0.2% to end at 5,836, while the Nasdaq slumped 0.4% to 19,088 on continued weakness in the tech sector.
Nvidia (NVDA) was one of the more notable decliners, sliding 2.0% after the Biden administration released new rules on how artificial intelligence (AI) chips and models can be shared with other countries, including issuing caps on the number of AI chips that can be exported to specific nations.
U.S. allies such as Britain and Canada are not subject to the restrictions while countries such as China and Russia will continue to face full bans on AI chip purchases.
In a statement, Nvidia said the new rules are a "sweeping overreach" that threaten "to derail innovation and economic growth worldwide."
Palantir keeps sliding
Palantir Technologies (PLTR), an AI software company, also sold off today, ending the session down 3.4%. PLTR was one of the hottest stocks of 2024 – more than quadrupling in value – but has shed 14% so far in 2025.
Morgan Stanley analyst Sanjit Singh recently initiated coverage on the tech stock with an Underweight (Sell) rating and a $60 price target, nearly 7% below where shares are currently trading.
"In the past 18 months or so, Palantir has driven better-than-expected U.S. commercial traction, U.S. government deal momentum, and operating expense discipline," Singh wrote in a January 6 note. This is now well-reflected in the share price, he adds.
Singh admits that the incoming Trump administration could create tailwinds for PLTR, but for now, the stock is "trading too far ahead of the company's intrinsic value to justify a rating upgrade."
Inflation data could spark more volatility
"The recent weakness in equity and bond markets, despite an encouraging payroll report, underscores a heightened sensitivity to inflation expectations and a prevailing pessimistic sentiment," says Mark Hackett, chief market strategist at Nationwide.
This "heightened sensitivity" could create more volatility for stocks following the release of key inflation data this week. Specifically, the December Producer Price Index (PPI) is set for release ahead of Tuesday's open and the December Consumer Price Index (CPI) is due out Wednesday morning.
Bank earnings will also start to roll in on Wednesday, with JPMorgan Chase (JPM) and Goldman Sachs (GS) among those reporting. You can follow all our earnings coverage on Kiplinger's earnings season live blog.
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