The technology and AI sectors provided structural support for the market. Driven by TSMC's better-than-expected earnings guidance and the AI cycle, the semiconductor index strengthened again, boosting the Nasdaq and overall technology stocks. Nvidia, SanDisk, and other chip and memory companies led the gains, with a significant rebound in investment activity within the technology sector.
The technology sector remains the core driver of the current market, especially AI and computing architecture-related stocks. Funds are inclined to reposition in leading companies after pullbacks.
Friday's earnings season was bright in smaller banks such as PNC (PNC) and Regions Financial (RF), following a series of optimistic earnings reports from major Wall Street banks. Shares of Goldman Sachs (GS) and Morgan Stanley (MS) rose after reporting earnings growth on Thursday, boosting financial stocks.
Meanwhile, silver (SI=F) prices fell as tariff threats eased, but still gained more than 15% this week after a long period of strong gains in the precious metal.
Wall Street is regrouping after a volatile week marked by escalating tensions with Iran, the Greenland dispute, and a criminal investigation that could jeopardize the Federal Reserve's independence—all closely tied to Trump's stance. With stock and bond markets closed Monday for Martin Luther King Jr. Day, investors can use the long weekend to digest these events.
TSMC (TSM) and Nvidia (NVDA) are poised for further gains, partly due to the potential $250 billion boost to the chip and technology manufacturing sector from a potential US-Taiwan trade deal. TSMC's strong quarterly earnings on Thursday boosted enthusiasm in the artificial intelligence sector, driving up related stocks and causing its share price to surge.
On Friday, markets opened higher but then declined, erasing earlier gains, pressured by uncertainty surrounding the selection of the next Federal Reserve chairman. Meanwhile, strong bank earnings and ongoing geopolitical tensions capped off a volatile week.
The technology-heavy Nasdaq Composite Index gave back its earlier gains, breaking below its consolidation range; the S&P 500 rose slightly by 0.08%. The Dow Jones Industrial Average fell slightly by 0.2% after ending a two-day losing streak on Thursday.
On Wednesday, the three major stock indexes fell as investors weighed the latest earnings reports from large banks and economic data, while remaining wary of potential reactions to the volatile situation in Iran.
The technology-heavy Nasdaq Composite index fell about 1.4%, and the S&P 500 index dropped nearly 1%. Meanwhile, the Dow Jones Industrial Average fell about 0.6%, following Tuesday's pullback in financial stocks that dragged Wall Street indexes down from their record highs. Technology stocks led the decline, with large-cap stocks falling across the board. Despite the US officially approving Nvidia's chip exports to China, the company's stock price still fell due to reports of potential restrictions. Tesla and Broadcom also saw significant declines in their share prices.
Meanwhile, concerns about US action against Iran intensified as President Trump escalated military threats against the country in response to Iran's deadly crackdown on civilian protests. Iran warned of retaliation against any attack, and the US withdrew some personnel from military bases in the region, causing oil prices to climb to a two-month high. Against this backdrop, Bank of America and Wells Fargo released their quarterly earnings reports, both showing significant profit growth driven by trading activity. However, their share prices fell, dragging down Citigroup's stock as well, exacerbating the subdued sentiment at the start of earnings season, which had already been dampened by JPMorgan Chase's disappointing results.
On the macroeconomic front, investors closely analyzed weak wholesale inflation data, which, coupled with the moderate consumer inflation data released on Tuesday, further solidified market expectations that the Federal Reserve would keep interest rates unchanged in January. Meanwhile, November retail sales data, delayed due to pandemic-related lockdowns, showed a larger-than-expected increase.
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JPMorgan Chase led the earnings season for major banks this week, with its quarterly profit falling short of expectations due to a $2.2 billion net loss from its acquisition of Apple's credit card. Shares of the largest bank opened down about 2%. As the earnings season informally kicks off, Bank of America (BAC), Citigroup (C), and Morgan Stanley (MS) will also release their results in the coming days.
Markets are closely watching Tuesday morning's consumer inflation data, a key reference for the Federal Reserve's interest rate decisions. The CPI report showed that inflationary pressures remained stable last month, with overall annual inflation at 2.7% and monthly inflation at 0.3%, in line with expectations. The core consumer price index (CPI) rose 0.2% month-over-month and 2.6% year-over-year, below expectations and marking the lowest annual increase since the beginning of 2021. These figures are particularly important after the December jobs report showed a cooling labor market. Traders have confirmed that the Federal Reserve will keep interest rates unchanged this month, but according to the CME FedWatch tool, the likelihood of interest rate cuts in the coming months has increased slightly.
Meanwhile, central bank governors worldwide, including Janet Yellen and Alan Greenspan, have condemned the Justice Department's investigation into Powell, arguing that it threatens the Federal Reserve's independence. Powell, whose term as Federal Reserve Chairman expires in May, has described the investigation as political pressure from President Trump, who has repeatedly called for significant interest rate cuts.
On Tuesday, the three major stock indexes closed mixed. Moderate inflation data boosted market expectations that the Federal Reserve would keep interest rates unchanged, while JPMorgan Chase's earnings kicked off the fourth-quarter earnings season.
The Dow Jones Industrial Average, dominated by blue-chip stocks, turned negative, falling about 0.6%, while the S&P 500 fell about 0.1%. On the other hand, the Nasdaq Composite Index, dominated by technology stocks, rose 0.3% before narrowing its gains.
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