(Jan 28): Wall Street traders sent stocks closer to their all-time highs on speculation that solid corporate earnings will keep powering market gains. The dollar slid to an almost four-year low. Gold held above US$5,000.
Not even a slide in consumer confidence prevented a fifth day of gains for the S&P 500, which approached 7,000. United Parcel Service Inc gave a bullish outlook. The Nasdaq 100 climbed 1% before megacap results. UnitedHealth Group Inc led losses in insurers on a disappointing forecast and as the US proposed holding payments to private Medicare plans flat next year.
The dollar slid toward its lowest since February 2022 as signs of US support to boost the yen reinforced the argument about potential coordinated intervention to guide the greenback lower against key trading partners.
On the eve of the Federal Reserve decision, Treasuries barely budged. The central bank is projected to halt its rate-cutting cycle as a steadier jobs market restores a degree of consensus among officials after months of growing division.
The expected decision to hold rates is likely to amplify the outrage of President Donald Trump, who wants them slashed.
See also: Medicare rates shock spurs US$90 bil rout in insurance stocks
With the economy still displaying exceptional strength, the Fed’s messaging is likely to emphasise a data-driven approach to future policy decisions, according to Chris Brigati at SWBC. Meantime, he said the tone from this week’s Magnificent Seven earnings should be solid, and upward revisions from analysts signal confidence is building.
“This week is pivotal in setting the market’s near-term tone as 2026 progresses,” Brigati noted. “History shows that a strong January often frames the narrative for the rest of the year, with investor psychology playing an outsized role.”
See also: UPS to cut another 30,000 jobs this year in sweeping cost-savings push
The S&P 500 rose 0.5%. The yield on 10-year Treasuries advanced one basis point to 4.22%. A dollar gauge fell 0.7%. US natural gas fell after a record rally.
“While short-term volatility is likely, we maintain our overall positive view toward risk assets,” said Ulrike Hoffmann-Burchardi at UBS Global Wealth Management. “Maintaining a diversified portfolio will help investors navigate markets with greater confidence.”
With about a third of S&P 500 companies by market capitalisation reporting results this week, she bets robust figures should boost sentiment and continue to underpin equity performance.
Roughly 81% of the firms in the US equity benchmark that have reported results thus far have beaten analyst earnings estimates, according to data compiled by Bloomberg.
“We expect tech earnings to be strong,” Hoffmann-Burchardi noted. “But we also expect earnings growth to broaden across sectors, with cyclical areas of the economy poised to benefit from supportive fiscal and monetary policies.”
At HSBC, Max Kettner says expectations for S&P 500 fourth-quarter (4Q) results are still “way too low.”
To stay ahead of Singapore and the region’s corporate and economic trends, click here for Latest Section
“So ahead of this week’s pivotal earnings releases, we think it makes sense to rotate from the rates-sensitive high-beta sectors back to mega caps,” he noted.
Despite these very solid results, share prices of companies beating on the top- and bottom-lines have witnessed negative relative price action after reporting, according to Chris Senyek at Wolfe Research.
“Said differently, double beats are being punished for solid results,” he said. “We do not view this trend as sustainable through earnings season and expect double beats to exhibit positive price action as more companies report.”
With several “Magnificent Seven” companies set to report this week, Senyek expects solid results from the space and positive price action luring investors back.
Microsoft Corp, Meta Platforms Inc and Tesla Inc report earnings on Wednesday, followed by Apple Inc on Thursday. Alphabet Inc, by far the best performer among the Magnificent Seven last year, reports on Feb 4. Results from Amazon.com Inc land on Feb 5 and Nvidia Corp’s on Feb 25.
The group is expected to post 20% profit growth for 4Q, which would be the slowest pace since early 2023, according to data compiled by Bloomberg Intelligence. So the companies are under pressure to show that the vast sums they’ve committed to capital expenditures are starting to pay off in a bigger way.
In the run-up to the Fed decision, data showed US consumer confidence declined in January to the lowest level in more than a decade on more pessimistic views of the economy and labour market.
The Conference Board’s gauge decreased to 84.5, from an upwardly revised 94.2 last month, data out on Tuesday showed. The figure was the lowest since May 2014 and fell short of all estimates in a Bloomberg survey of economists.
“Given this latest data, expect the unemployment rate to rise,” said Jeff Roach at LPL Financial. “This will weigh on retail sales in these coming months.”
On the surface, the latest report looks like a red flag, but for investors, the signal is more nuanced, according to Lale Akoner at eToro.
“This kind of confidence slump tends to slow discretionary spending rather than trigger a full economic downturn,” Akoner said. “If inflation continues to cool and growth softens gradually, rate cuts later in the year or into 2026 become more likely.”
That backdrop is typically supportive for long-duration assets like equities and bonds, even if volatility persists in the short term, Akoner noted.
Uploaded by Felyx Teoh
