On Friday, the S&P 500 Index ($SPX) (SPY) closed down -0.06%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.17%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.07%. March E-mini S&P futures (ESH26) fell -0.06%, and March E-mini Nasdaq futures (NQH26) fell -0.08%.
Stock indexes gave up early gains on Friday and closed slightly lower as bond yields rose. The 10-year T-note yield rose +6 bp to a 4.5-month high of 4.23% on Friday after President Trump expressed reluctance to nominate Kevin Hassett as Fed chairman. The markets viewed Hassett as the most modest candidate and a top contender for the Fed Chair nomination, so nominating someone like Kevin Wersh, a well-known hawk and the second most likely Fed Chair candidate, reduced speculation about future Fed rate cuts, pushing bond yields higher, and pressurizing stocks.
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Stocks rose early on Friday due to strength in chip makers. Chipmakers and data storage companies are confident that spending on artificial intelligence will continue after Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest dedicated contract chipmaker, raised its 2026 capital expenditure forecast on Thursday.
Friday’s US economic news was mixed for stocks. December manufacturing output unexpectedly rose by +0.2% m/m, stronger than the decline of -0.1% m/m. Additionally, November manufacturing output rose +0.3% m/m from unchanged m/m previously reported. In contrast, the mass NAHB housing market index unexpectedly fell by -2 to 37, weaker than expected to rise to 40.
The first full week of Q4 earnings season has also been a positive force for stocks, with 89% of the 28 S&P 500 companies reporting better than expectations so far. According to Bloomberg Intelligence, S&P earnings growth is expected to increase by +8.4% in Q4. Magnificent Seven Excluding megacap technology stocks, Q4 earnings are expected to increase +4.6%.
The Supreme Court did not rule on challenges to President Trump’s tariffs on Wednesday. The court did not say when it would issue its next opinion, but could set further decisions next Tuesday and Wednesday, when the judges are in session again.
Markets are reducing the chances of a -25 bp rate cut to 5% at the next FOMC meeting on January 27-28.
Foreign stock markets closed with a decline on Friday. Euro Stoxx 50 closed down by -0.19%. China’s Shanghai Composite closed down by -0.26%. Japan’s Nikkei stock closed 225 down -0.32%.
interest rates
March 10-year T-notes (ZNH6) closed below -15 ticks on Friday. The 10-year T-note yield rose +5.6bp to 4.225%. March T-notes fell to a 4.75-month low on Friday, and the 10-year T-note yield hit a 4.5-month high of 4.231%. Rising inflation expectations weighed on T-notes after the 10-year breakeven inflation rate climbed to a 2.25-month high of 2.326% on Friday. Furthermore, the unexpected increase in December manufacturing output is counterproductive to Fed policy and is cutting T-notes.
Losses in T-notes intensified on Friday after President Trump expressed reluctance to nominate Kevin Hassett as the next Fed chair and said he would prefer to keep him as director of the National Economic Council. The markets viewed Hassett as the most modest candidate and top contender for the Fed Chair nomination, so nominating someone like Kevin Warsh, a well-known hawk and the second most likely Fed Chair candidate, would be bearish for T-note prices.
European government bond yields rose on Friday. The 10-year German Bund yield rose +1.6bp to 2.835%. 10-year UK gilt yields rose +1.2bp to 4.400%.
“Our baseline scenario envisages inflation more or less on target for several years, growth close to potential and low and falling unemployment. Under these circumstances, there is no debate on near-term interest rates,” said Philip Lane, ECB chief economist.
The swaps are discounting a +5% probability of a +25 bp rate hike by the ECB at its next policy meeting on February 1.
US Stock Movers
Chipmakers and data storage companies are moving on renewed optimism for AI spending after TSMC boosted its 2026 capital spending plans on Thursday. Super Micro Computer closed up more than +10% in the S&P 500, and Micron Technology (MU) closed up more than +7% in the Nasdaq 100. Additionally, Applied Materials (AMAT), Lam Research (LRCX), Broadcom (AVGO), and ASML Holding NV (ASML) closed with gains of more than +2%. Additionally, Advanced Micro Devices (AMD), KLA Corp. (KLAC), Seagate Technology Holdings PLC (STX), and Texas Instruments (TXN) closed more than +1%.
Power supplies are under pressure today due to President Trump’s move to push for emergency wholesale power auctions and make tech giants pay for rising power costs. Talen Energy (TLN) closed down more than -11%, and Constellation Energy (CEG) closed down more than -9%, leading the S&P 500 and Nasdaq 100’s decline. Additionally, Vistra (VST) closed down over -7%, and NRG Energy (NRG) closed down over -4%.
State Street (STT) closed down more than -5% despite reporting better-than-expected Q4 EPS after it said full-year expenses would rise 3% to 4% this year.
Mosaic (MOS) closed down more than 4% after saying that shipments to the North American phosphate market are projected to be down about -20% year-over-year in Q4.
QXO Inc. (QXO) closed down more than -4% after seeking to raise $750 million from an overnight block trade marketed at $23.80 to $24.00 per share, down from Thursday’s closing price of $25.02.
Brown-Forman Corp (BF.B) closed down more than -3% after BNP Paribas SA downgraded the stock to Underperform from Neutral with a price target of $24.
Molson Coors Beverage Company (TAP) closed down more than -3% after BNP Paribas SA downgraded the stock to Underperform from Neutral with a price target of $40.
Regions Financial (RF) closed down more than -2% after reporting Q4 EPS of 58 cents, weaker than the consensus of 62 cents.
Kraft Heinz Co. (KHC) closed down more than -2% after Morgan Stanley downgraded the stock from Equal Weight to Underweight with a price target of $24.
JB Hunt Transportation Services (JBHT) closed down more than -1% after reporting third-quarter sales of $3.10 billion, below the consensus estimate of $3.11 billion.
GE Vernova (GEV) closed up more than +6% after Jefferies said the company will benefit from President Trump’s push for emergency wholesale power auctions and a move to make tech giants pay for rising power costs.
Rocket Lab Corp (RKLB) closed up more than +6% after Morgan Stanley upgraded the stock from equal weight to overweight with a price target of $105.
Eaton Corp PLC (ETN) closed up more than +3% after HSBC upgraded the stock to buy from hold with a price target of $400.
PNC Financial Services Group (PNC) closed up more than +3% after reporting fourth-quarter non-interest income of $2.34 billion, which exceeded the consensus of $2.26 billion.
Dave & Buster’s Entertainment (PLAY) closed up more than +2% after the benchmark company upgraded the stock to buy from hold with a $30 price target.
Honeywell International (HON) closed up more than +2% after JPMorgan Chase upgraded the stock from Neutral to Overweight with a price target of $255.
Earnings Report(1/20/2026)
3M Company (MMM), DR Horton Inc (DHI), Fastenal Company (FAST), Fifth Third Bancorp (FITB), Interactive Brokers Group Inc (IBKR), KeyCorp (KEY), Netflix Inc (NFLX), United Airlines Holdings Inc (UAL), US Bancorp (USB).
On the date of publication, Rich Asplund did not have (directly or indirectly) any positions in any securities mentioned in this article. All information and data in this article is for informational purposes only. Please see the Barchart Disclosure Policy here for more information.
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