Market Overview
The S&P 500 Index saw a rise of +0.47% today, while the Dow Jones Industrial Average dipped -0.84%. In contrast, the Nasdaq 100 Index climbed +0.87%. March E-mini S&P futures rose +0.48%, and March E-mini Nasdaq futures increased by +0.90%.
Overall, stock indexes were predominantly up, with the S&P 500 reaching a two-week high and the Nasdaq 100 hitting a 2.75-month high. The rally in the broader market was fueled by gains in chipmakers and AI infrastructure stocks, which jumped 5% after Micron Technology announced a $24 billion investment in Singapore for expanding memory chip production. This surge occurred despite the Conference Board’s January US Consumer Confidence Index unexpectedly dropping to an 11-and-a-half-year low.
On a less positive note, the Dow Jones was pulled down by health insurance stocks following a proposal from the U.S. government to keep payments to private Medicare plans flat for the upcoming year. UnitedHealth Group Inc. reported that its forecast for 2026 hinted at a potential revenue contraction, the first in over three decades, leading to further losses in its stock.
Adding to the market’s challenges is President Trump’s renewed threat regarding 100% tariffs on Canadian imports, worries about a possible U.S. government shutdown over funding issues, and disruptions from a significant storm that moved across the U.S. Furthermore, there’s uncertainty surrounding the Federal Reserve, especially with an FOMC meeting approaching that is expected to maintain interest rates. Any decision to hold rates steady could lead to renewed pressures from political figures.
The looming risk of another partial government shutdown is also impacting stocks. Democrats in the Senate have indicated they might obstruct a federal funding agreement with the Department of Homeland Security concerning ICE, especially after the tragic shooting of an ICU nurse in Minnesota. The expiration of current funding measures on Friday raises concerns over a potential shutdown.
Meanwhile, ADP’s report indicated a rise of just 7,750 jobs a week on average over the four weeks ending January 3, the lowest increase seen in six weeks. The S&P 20 Composite Home Price Index experienced a year-over-year increase of +1.39% in November, outpacing expectations of +1.20%.
In other news, the Richmond Fed’s Manufacturing Business Index showed a decline from +1 to -6, slightly below the predicted -5.
This week, investors are eyeing developments regarding tariffs and the ongoing negotiations for government funding. The FOMC is anticipated to keep the federal funds target range steady between 3.50% and 3.75%. Fed Chair Jerome Powell’s comments after the meeting will be closely monitored for insight into future monetary policy. Initial weekly jobless claims are projected to rise by 5,000 to reach 205,000 on Thursday, while non-agricultural productivity for the third quarter is expected to hold at 4.9%. The trade deficit in November is anticipated to widen to -$44.1 billion. Finally, factory orders for November are expected to increase by +1.6% month-over-month, with December’s PPI final demand projected to slow to +2.8% year-over-year.
As earnings season progresses, 102 S&P 500 companies are set to report their results this week. So far, 81% of the 83 companies have posted earnings that surpassed expectations. Fourth-quarter earnings growth for the S&P is anticipated at +8.4%, although excluding the so-called “Magnificent Seven” tech stocks, growth is expected at +4.6%.
Currently, the markets are assigning a 3% probability to a possible -25 basis point rate cut during the FOMC meeting on January 27th and 28th.
Overseas markets are mostly in the green today. The Euro Stoxx 50 rose to its highest point in a week, gaining +0.46%. The Shanghai Composite in China ended up +0.18%, while Japan’s Nikkei Stock Average closed +0.85% higher.
Interest Rate Developments
March 10th T Notes fell slightly, with the yield on the 10-year T-note advancing by 0.4 basis points to 4.215%. The drop in stock prices weighed on T-Notes, coupled with supply pressures ahead of a $70 billion auction of five-year T-notes later today. Interestingly, T-Notes have recovered much of their losses following the surprise drop in U.S. consumer confidence.
European bond yields displayed a mixed performance today. The yield on German 10-year federal bonds decreased by -0.2 basis points to 2.865%, while the UK’s 10-year bond yield increased by 2.0 basis points to 4.517%.
In the euro area, new car registrations in December climbed by 5.8% year-over-year, marking the sixth month of consecutive growth.
There’s currently no expectation of the ECB raising interest rates by 25 basis points at its policy meeting on February 5th.
Sector Highlights
Chipmakers and AI infrastructure stocks experienced significant gains today. Seagate Technology Holdings rose over +6%, becoming one of the notable gainers on the Nasdaq 100, while other companies like Lam Research and Western Digital increased by over +5%. Micron Technology also climbed more than 4% following its announcement of a $24 billion investment in Singapore. Applied Materials, KLA Corporation, ASML Holding, and Intel all recorded gains of over +3% as well. Nvidia, Broadcom, Marvell Technology, and Microchip Technology saw increases exceeding +1%.
Conversely, health insurance stocks faced a downturn after the U.S. government proposed flat Medicare payments for the coming year. UnitedHealth Group led the decline in both the S&P 500 and the Dow, dropping more than 19% due to concerns about future revenue. Other companies like Humana and Alignment Healthcare also saw substantial losses.
Redwire Corp. surged by more than +26% after securing a significant defense contract. Corning rose over +16% following the announcement of a multi-year, $6 billion deal with Meta Platforms. HCA Healthcare’s fourth-quarter earnings substantially exceeded expectations, and General Motors also forecast fourth-quarter adjusted EPS that were above consensus.
However, Agilysys experienced a steep decline of more than -20% due to lower-than-expected third-quarter earnings. Sanmina slipped over -17% due to disappointing revenue projections, while Roper Technologies led the Nasdaq 100 decline with a drop of more than -14% following lowered earnings forecasts.
Financial results worth noting from other prominent companies are expected to be released soon, including NextEra Energy, Boeing, and UPS, among others.
