Stocks Fall on Weakness in Software and Credit Card Companies

The S&P 500 Index ($SPX) (SPY) on Tuesday closed down -0.19%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.80%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.18%.  March E-mini S&P futures (ESH26) fell -0.22%, and March E-mini Nasdaq futures (NQH26) fell -0.18%.

Stock indexes gave up early gains and retreated on Tuesday as software stocks sold off after AI startup Anthropic released a preview of a new tool designed for a broader range of work-related tasks beyond coding. Also, credit card companies fell for a second day on Tuesday to weigh on the overall market after President Trump said credit-card lenders would be “in violation of the law” if they don’t cap interest rates at 10% for one year. 

Stocks moved higher briefly on Tuesday as inflation concerns eased after the US December core consumer prices rose less than expected. Also, energy-producing stocks moved higher on Tuesday after WTI crude oil rose more than +2% to a 2.25-month high. Geopolitical risks are pushing crude oil higher as the US ratcheted up pressure on Iran after President Trump announced a 25% tariff on goods from countries “doing business” with Iran.  In addition, drone attacks on oil tankers near the Caspian Pipeline Consortium terminal on Russia’s Black Sea Coast have reduced crude loadings at the terminal by almost half to around 900,000 bpd.

Stocks have some negative carryover from Monday on concerns about Fed independence, after Fed Chair Powell said the Justice Department was threatening a criminal indictment tied to his June testimony on Fed headquarters renovations, in retaliation for the Fed's refusal to go along with President Trump’s calls for lower interest rates. 

US Dec CPI was unchanged from Nov at +2.7% y/y, right on expectations.  Dec core CPI was also unchanged from Nov at +2.6% y/y, a smaller increase than expectations of +2.7% y/y.

US Oct new home sales fell 0.1% m/m to 737,000, beating expectations of 715,000.

St. Louis Fed President Alberto Musalem said the US economy is pretty robust, and he expects above-potential growth, and that it is unnecessary and unadvisable for the Fed to take an accommodative stance.

The market’s focus this week will be on economic news and any fresh news on the Federal Reserve.  On Wednesday, Nov PPI final demand is expected to increase +2.7% y/y, and Nov core PPI is also expected to climb by +2.7% y/y.  Also, Nov retail sales are expected to have increased +0.5% m/m and +0.4% m/m ex-autos.  In addition, Dec existing home sales are expected to climb +2.2% m/m to 4.22 million. Finally, the Supreme Court on Wednesday may rule on the legality of President Trump’s tariffs.  On Thursday, weekly initial unemployment claims are expected to increase by +7,000 to 215,000.  Also, the Jan Empire manufacturing survey of general business conditions is expected to climb by +4.9 to 1.0.  On Friday, Dec manufacturing production is expected to fall -0.1% m/m. Also, the Jan NAHB housing market index is expected to increase by +1 to 40.

Q4 earnings season is set to begin this week as bank earnings start to roll in.  According to Bloomberg Intelligence, S&P earnings growth is expected to climb by +8.4% in Q4.  Excluding the Magnificent Seven megacap technology stocks, Q4 earnings are expected to increase by +4.6%.

The markets are discounting the odds to 3% for a -25 bp rate cut at the FOMC’s next meeting on January 27-28.

Overseas stock markets settled mixed on Tuesday.  The Euro Stoxx 50 rallied to a new record high and closed up +0.22%.  China’s Shanghai Composite fell from a 10.5-year high and closed down -0.64%.  Japan’s Nikkei Stock 225 rallied to a new all-time high and closed up sharply by +3.10%.

Interest Rates

March 10-year T-notes (ZNH6) on Tuesday closed up by +4 ticks.  The 10-year T-note yield fell -0.8 bp to 4.167%.  Mar T-notes recovered from overnight losses and moved higher on Tuesday after the US Dec core CPI rose less than expected, easing inflation concerns.  T-notes added to their gains Tuesday afternoon after strong demand was seen for the Treasury’s $22 billion 20-year T-bond auction that had a bid-to-cover ratio of 2.42, above the 10-auction average of 2.36.

T-notes initially moved lower on Tuesday on carryover pressure from Monday on concerns over Fed independence, when Fed Chair Powell said the Justice Department was threatening a criminal indictment tied to his June testimony on Fed headquarters renovations in retaliation for the Fed not going along with President Trump’s calls for lower interest rates.  Also, hawkish comments from St. Louis Fed President Alberto Musalem were bearish for T-notes when he said it is unnecessary and unadvisable for the Fed to take an accommodative stance.

European government bond yields are moving higher today.  The 10-year German bund yield rose +0.7 bp to 2.847%.  The 10-year UK gilt yield rose +2.5 bp to 4.398%.

Swaps are discounting a 1% chance of a +25 bp rate hike by the ECB at its next policy meeting on February 5.

US Stock Movers

Software stocks retreated on Tuesday after AI startup Anthropic released a preview of a new tool designed for a broader range of work-related tasks beyond coding.  Salesforce (CRM) closed down more than -7% to lead losers in the S&P 500 and Dow Jones Industrials. Also, Adobe (ADBE) closed down by more than -5% and Intuit (INTU) closed down by more than -4%.  In addition, Workday (WDAY) and ServiceNow (NOW) closed down more than -3%.  Finally, Autodesk (ADSK) closed down by more than -2%, and Microsoft (MSFT) closed down by more than -1%.   

Credit card companies fell for a second day on Tuesday after President Trump said credit-card lenders would be “in violation of the law” if they don’t cap interest rates at 10% for one year.  Visa (V) closed down more than -4%, and Mastercard (MA) and JPMorgan Chase (JPM) closed down more than -3%.

Travere Therapeutics (TVTX) closed down more than -14% after the company said it received an FDA request to clarify the clinical benefit of its therapy for a rare kidney disease, a move analysts said could delay the agency's approval. 

Super Micro Computer (SMCI) closed down more than -4% after Goldman Sachs initiated coverage with a sell recommendation and a $26 price target. 

CRH Plc (CRH) is down more than -3% after Wells Fargo Securities downgraded the stock to equal weight from overweight. 

Synopsys (SNPS) closed down more than -3% after Piper Sandler downgraded the stock to neutral from overweight with a price target of $520. 

Chipotle Mexican Grill (CMG) closed down more than -2% after announcing that Chris Brandt has stepped down as chief brand officer.

Delta Air Lines (DAL) closed down more than -2% after it forecast full-year adjusted EPS of $6.50 to $7.50, the midpoint below the consensus of $7.20. 

Moderna (MRNA) closed up more than+17% to lead vaccine makers higher and gainers in the S&P 500 after several medical organizations, including the American Academy of Pediatrics, plan to ask the courts to throw out revisions to the childhood vaccination schedule announced last week by Health Secretary Kennedy, saying the vaccine schedule is not based on scientific evidence and will harm the public. 

Option Care Health (OPCH) closed up more than +8% after TD Cowen said the company’s forecast for 2026 EBITDA growth of +2% to +7% are better than we expected.

Intel (INTC) closed up more than +7% to lead gainers in the Nasdaq 100 after KeyBanc Capital Markets upgraded the stock to overweight from sector weight with a price target of $60.

Advanced Micro Devices (AMD) closed up more than +6% after KeyBanc Capital Markets upgraded the stock to overweight from sector weight with a price target of $270.

Revvity (RVTY) closed up more than +6% after reporting preliminary Q4 revenue of $772 million, stronger than the consensus of $756.9 million. 

Albemarle Corp (ALB) closed up more than +4% after Deutsche Bank upgraded the stock to buy from hold with a price target of $185. 

Cardinal Health (CAH) closed up +3% after raising its full-year adjusted EPS forecast to at least $10.00 from a previous forecast of $9.65-$9.85, stronger than the consensus of $9.83. 

Huntington Ingalls Industries (HII) closed up more than +3% after Bernstein raised its price target on the stock to $412 from $362. 

Alphabet (GOOGL) closed up more than +1% after Google entered into a multiyear deal with Apple to power Apple’s AI technology. 

Earnings Reports(1/14/2026)

Bank of America Corp (BAC), Citigroup Inc (C), Wells Fargo & Co (WFC).