Stocks Boosted by Chip Demand Optimism

The S&P 500 Index ($SPX) (SPY) on Thursday closed up +0.26%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.60%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.32%.  March E-mini S&P futures (ESH26) rose +0.24%, and March E-mini Nasdaq futures (NQH26) rose +0.32%.

Stock indexes settled higher on Thursday, led by a rally in chip makers after Taiwan Semiconductor Manufacturing Co (TSMC), the world’s largest dedicated contract chipmaker, revived confidence in the sustainability of artificial-intelligence demand.  TSMC forecasted stronger-than-expected Q1 sales and boosted its 2026 capital expenditure forecast to $52 billion-$56 billion from $40.9 billion in 2025. 

Stocks also found support after Thursday’s economic news showed signs of strength in the US economy after weekly jobless claims unexpectedly fell to a 6-week low, and the Jan Empire and Jan Philadelphia Fed business outlook surveys rose more than expected. 

Easing geopolitical risks in Iran were also supportive for equities after President Trump said he had been assured that Iran would stop killing protesters, in a signal that the US could hold off on a threatened military response to the widespread demonstrations.  WTI crude oil sank more than -4% on the news.

However, stocks fell back from their best levels as hawkish Fed comments pushed bond yields higher.  The 10-year T-note yield rose +3 bp to 4.16% after Atlanta Fed President Raphael Bostic said the Fed needs to stay restrictive because he expects inflation pressures to continue through 2026.  Also, Kansas City Fed President Jeff Schmid said, "With inflation pressures still evident, my preferences would be to keep monetary policy modestly restrictive."

US weekly initial unemployment claims unexpectedly fell -9,000 to a 6-week low of 198,000, showing a stronger labor market than expectations of an increase to 215,000.

The US Jan Empire manufacturing survey of general business conditions rose +11.4 to 7.7, stronger than expectations of 1.0.

The US Jan Philadelphia Fed business outlook survey rose +21.4 to a four-month high of 12.6, stronger than expectations of -1.4.

President Trump told Reuters that he "has no plans" to fire Fed Chair Powell despite a Justice Department probe into the central bank's renovation.

The Supreme Court didn’t rule on challenges to President Trump’s tariffs on Wednesday.  The court did not say when it will issue its next opinions but could schedule more decisions for next Tuesday and Wednesday, when the justices are again in session.

The market’s focus this week will be on economic news and any fresh news on the Federal Reserve.  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 5% for a -25 bp rate cut at the FOMC’s next meeting on January 27-28.

Overseas stock markets settled mixed on Thursday.  The Euro Stoxx 50 closed up by +0.60%.  China’s Shanghai Composite closed down by -0.33%.  Japan’s Nikkei Stock 225 closed down by -0.42%.

Interest Rates

March 10-year T-notes (ZNH6) on Thursday closed down by -8 ticks.  The 10-year T-note yield rose +2.8 bp to 4.160%.  Thursday's strength in stocks curbed safe-haven demand for T-notes.  Also, an easing of geopolitical risks in Iran reduced the safe-haven appeal of T-notes after President Trump signaled he may hold off on attacking Iran after he was assured that the Iranian government would stop killing protesters.  T-notes added to their losses on today’s better-than-expected US economic news on weekly jobless claims, and the Jan Empire and Jan Philadelphia Fed business outlook surveys.  Also, hawkish comments from Atlanta Fed President Raphael Bostic and Kansas City Fed President Jeff Schmid were bearish for T-note prices, as they said the Fed needs to remain restrictive amid inflation pressures.

European government bond yields moved higher on Thursday.  The 10-year German bund yield rose +0.4 bp to 2.819%.  The 10-year UK gilt yield rose +4.8 bp to 4.388%.

Eurozone Nov industrial production rose +0.7% m/m, stronger than expectations of +0.5% m/m

UK Nov manufacturing production rose +2.1% m/m, stronger than expectations of +0.4% m/m and the largest increase in 9 months.

UK Nov GDP rose +0.3% m/m, stronger than expectations of +0.1% m/m.

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

Chip makers are climbing today after TSMC forecasted stronger-than-expected Q1 net sales and boosted its 2026 capital spending plans.  KLA Corp (KLAC) closed up more than +7% to lead gainers in the S&P 500 and Nasdaq 100, and Applied Materials (AMAT) closed up more than +6%.  Also, ASML Holding NV (ASML) closed up more than +5%, and Lam Research (LRCX) closed up more than +4%.  In addition, Advanced Micro Devices (AMD), Nvidia (NVDA), Analog Devices (ADI), and Micron Technology (MU) closed up more than +1%.

Energy producers and energy service providers sold off on Thursday as WTI crude oil plunged more than -4%.  Devon Energy (DVN) closed down more than -4%, and APA Corp (APA), Occidental Petroleum (OXY), and Marathon Petroleum (MPC) closed down more than -2%.  In addition, ConocoPhillips (COP), Diamondback Energy (FANG), and Valero Energy (VLO) closed down more than -1%.

Most cryptocurrency-exposed stocks fell on Thursday after the US Senate Banking Committee delayed its discussion of the crypto market structure bill.  Coinbase Global (COIN) closed down more than -6%, and Strategy (MSTR) closed down more than -4% to lead losers in the Nasdaq 100.  Also, Riot Platforms (RIOT) closed down more than -4%, and Mara Holdings (MARA) closed down more than -3%.

Calavo Growers (CVGW) closed up more than +13% after Mission Produce agreed to buy the company for about $27 a share in cash and stock. 

Talen Energy (TLN) closed up more than +12% after signing an agreement to acquire three natural gas power plants from Energy Capital Partners for $3.45 billion. 

Penumbra (PEN) closed up more than +11% after Boston Scientific agreed to buy the company for about $14.5 billion, or $374 a share. 

Morgan Stanley (MS) closed up more than +5% after reporting Q4 FICC sales and trading revenue excluding DVA of $3.67 billion, better than the consensus of $3.55 billion. 

Black Rock (BLK) closed up more than +5% after reporting Q4 net inflows of $341.71 billion, above the consensus of $287.49 billion. 

Sandisk (SNDK) closed up more than +5% after Benchmark Company LLC raised its price target on the stock to $450 from $260. 

Goldman Sachs (GS) closed up more than +4% to lead gainers in the Dow Jones Industrials after reporting Q4 FICC sales and trading revenue of $3.11 billion, stronger than the consensus of $2.95 billion.

Baker Hughes (BKR) closed up more than +4% after CEO Simonelli said his company has the largest installed base of rotating and artificial lift equipment, machinery that speeds up crude production in Venezuela, and it sees providing power generation equipment for crude production in Venezuela as its biggest immediate growth opportunity.

MoonLake Immunotherapeutics (MLTX) closed down more than -5% after Goldman Sachs downgraded the stock to sell from neutral with a price target of $10. 

Nutanix (NTNX) closed down more than -5% after Barclays downgraded the stock to equal weight from overweight.

Eli Lilly (LLY) closed down more than -3% after Reuters reported on FDA delays to drugs that are part of a new fast-tracked voucher program.

Boston Scientific (BSX) closed down more than -3% after agreeing to buy Penumbra for about $14.5 billion, or $374 a share. 

GE HealthCare Technologies (GEHC) closed down more than -3% after UBS downgraded the stock to sell from neutral with a price target of $77. 

Albertson’s Cos Inc (ACI) closed down more than -1% after Morgan Stanley downgraded the stock to underweight from equal weight with a price target of $14. 

Earnings Reports(1/16/2026)

BOK Financial Corp (BOKF), M&T Bank Corp (MTB), PNC Financial Services Group Inc (PNC), Regions Financial Corp (RF), State Street Corp (STT).