Market Update

The S&P 500 Index slipped slightly today, down -0.06%, while the Dow Jones Industrial Average fell -0.11%. In contrast, the Nasdaq 100 managed to increase by +0.19%. There was a mix of performances among stock indexes, especially after the S&P 500 reached a new all-time high earlier in the day and the Nasdaq 100 peaked at a three-month high. A boost in chipmakers and AI infrastructure stocks is invigorating the market, particularly with ASML Holding NV reporting a significant rise in orders. The company, which is the sole producer of the lithography equipment used for advanced semiconductors, announced record fourth-quarter bookings of €13.2 billion, surpassing expectations of €6.85 billion. Additionally, both Seagate Technology Holdings NV and Texas Instruments exceeded earnings projections.

Nonetheless, stocks retreated from their highs after the Federal Reserve decided to pause interest rate cuts, keeping the benchmark rate steady at 3.5% to 3.75%. This decision was largely anticipated, as it marked the end of three consecutive quarterly cuts aimed at stabilizing the labor market.

The dollar index saw an uptick today, recovering some of the losses it faced after reaching a near four-year low on Tuesday. This drop in the dollar came after President Trump mentioned that he was pleased with its recent weakening. Gold prices surged by over +3% to a new all-time high, partly influenced by Trump’s remarks.

In the energy sector, WTI crude oil prices climbed to a four-month high following Trump’s call for Iran to negotiate a “fair and equitable deal without nuclear weapons.” He also cautioned that time was running out for a deal with the U.S., noting the deployment of American warships in the region.

Home loan applications in the U.S. fell sharply, with the MBA reporting an 8.5% decline for the week ending January 23. The purchase mortgage sub-index dipped -0.4%, while the refinance mortgage segment plummeted by 15.7%. The average rate for a 30-year fixed mortgage increased to 6.24%, a rise from 6.16% the previous week.

Concerns about stocks and the dollar persist. Trump’s threats of new 100% tariffs on Canadian imports loom, alongside worries about potential government shutdowns linked to ICE funding and ongoing issues surrounding Greenland. Political uncertainty is heightened with the Federal Open Market Committee’s expected decision to maintain interest rates during today’s meeting, as a refusal to lower them could lead to more tensions from Trump.

There are fears that another partial government shutdown would negatively affect stocks. Senate Democrats are cautioning against a federal funding deal for the Department of Homeland Security in light of a tragic shooting involving an ICU nurse in Minnesota. If current funding measures are not extended before Friday, a shutdown could occur.

This week, market attention will focus on new tariff updates and discussions regarding the government funding resolution. The FOMC is likely to hold its federal funds target range steady at 3.50% to 3.75%. Analysts will closely examine Fed Chairman Jerome Powell’s remarks post-meeting for insights into future policies. Additionally, jobless claims are anticipated to increase by 5,000 to 205,000 on Thursday, while non-agricultural productivity is expected to remain stable at 4.9%. The trade deficit is forecasted to widen to -$44.1 billion in November, with factory offers likely increasing by +1.6% month-over-month. On Friday, the December PPI final demand is projected to cool to +2.8% year-on-year from +3.0%, while PPI excluding food and energy is also expected to taper to +2.9% from +3.0%. Moreover, the MNI Chicago PMI is predicted to rise by +0.8 to 43.5 in January.

As the fourth-quarter earnings season unfolds, 102 S&P 500 companies are set to announce their results this week. Among them, Microsoft, Meta Platforms, and Tesla will release after the market closes today, while Apple will follow suit on Thursday. Overall, earnings have been positive, with 81% of the 83 reporting S&P 500 companies surpassing expectations. Bloomberg Intelligence estimates a +8.4% growth for S&P’s fourth-quarter earnings, and when excluding the top seven technology stocks, growth is expected at +4.6%.

The market is currently assigning a 3% probability for a -25 basis point rate cut at the end of the FOMC’s session today.

Internationally, mixed results were noted in stock markets today. The Euro Stoxx 50 dropped -0.83% after reaching a 1.5-week peak, while China’s Shanghai Composite climbed to a two-week high, closing up +0.27%. Japan’s Nikkei Stock Average also saw a slight uptick of +0.05%.

The March 10th T Note decreased by -4 ticks today. The yield for 10-year T-notes increased by 2.2 basis points to 4.255%. The recent rise in the S&P 500 dampens the demand for T-notes as a safe haven. Continuing position liquidation is also influencing T-note performance ahead of the FOMC’s announcements.

European bond yields showed varied trends today, with German 10-year bonds falling by -1.3 basis points to 2.862%. Conversely, UK 10-year bond yields climbed to a five-week peak of 4.546%, marking an increase of +1.9 basis points.

Germany’s GfK Consumer Confidence Index for February rose +2.8 to -24.1, surpassing forecasts which predicted -25.5.

A central bank official from Austria indicated that the ECB might need to consider further rate cuts if the euro’s value rises significantly enough to diminish inflation expectations.

The expectation for a 25 basis point hike in interest rates by the ECB at its next meeting on February 5 is currently viewed as unlikely.

In the tech sector, chipmakers and AI infrastructure stocks are gaining momentum, fueled by strong financial results from companies like ASML, Seagate Technology, and Texas Instruments, which reflect robust AI investment. Seagate Technology shares jumped more than +17%, leading gains in both the S&P 500 and Nasdaq 100. Companies such as Intel, Western Digital, and Texas Instruments also saw increases of over +8%. Meanwhile, Microchip Technology, SanDisk, and Micron Technology experienced gains of over +5%, and NXP Semiconductors and ON Semiconductor rose by more than +4%.

F5 Inc. reported fourth-quarter revenues of $822.5 million, exceeding the consensus estimate of $758.8 million, showing growth of over +7%. The company also raised its revenue forecast for the year.

Elevance Health surged over 5% after announcing a $2.3 billion share buyback plan for this year.

AT&T also showed improvement with more than +3% growth after releasing Q4 revenues of $33.5 billion, surpassing the expected $32.83 billion.

PPG Industries revealed fourth-quarter net sales of $3.91 billion, exceeding consensus estimates of $3.78 billion, an increase of more than +3%.

MSCI Inc. saw a rise of over +2% as well, reporting total recurring subscriptions of $2.45 billion, ahead of the expected $2.44 billion.

Starbucks climbed by more than +2% after reporting a +4% increase in Q1 U.S. same-store sales, beating the consensus of +1.88%. The company also projected a minimum +3% growth for full-year comparable sales, which is higher than the expected +2.83%.

However, Amphenol Corp led the decliners, falling over -13% after its fourth-quarter results reportedly fell short of revenue expectations, indicating a potential increase in demand. Similarly, Textron declined more than -9%, with adjusted EPS projections for 2026 falling below forecasts. Qorvo also dropped over -5% as expected EPS for the quarter missed consensus estimates. Otis Worldwide saw a decline of more than -3% post-revenue announcement, and Danaher dropped over -2% following below-consensus EPS forecasts. PayPal Holdings fell slightly after a downgrade by Rothschild & Company.

Looking ahead, several companies, including Amphenol, ASML, AT&T, and Tesla, are preparing to release financial results by January 28.