Stocks Climb on Renewed Optimism for AI Spending

The S&P 500 Index ($SPX) (SPY) today is up +0.27%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.06%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.46%.  March E-mini S&P futures (ESH26) are up +0.25%, and March E-mini Nasdaq futures (NQH26) are up +0.47%.

Stock indexes are mostly higher today, adding to Thursday’s rally, as chip stocks push higher on demand optimism.   Confidence that spending on artificial intelligence will continue is underpinning chip makers and data storage companies after Taiwan Semiconductor Manufacturing Co (TSMC), the world’s largest dedicated contract chipmaker, boosted its 2026 capital expenditure forecast on Thursday.  Higher bond yields are limiting the upside in stocks today, with the 10-year T-note yield up +2 bp to 4.19%.

Today’s US economic news shows strength and is positive for stocks as Dec manufacturing production unexpectedly rose by +0.2% m/m, stronger than expectations of a decline of -0.1% m/m.  Also, Nov manufacturing production was revised upward to +0.3% m/m from the previously reported unchanged m/m.

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 that have reported so far beating expectations.  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 market’s focus this week will be on economic news and any fresh news on the Federal Reserve.  Later today, the Jan NAHB housing market index is expected to increase by +1 to 40.

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 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 are lower today.  The Euro Stoxx 50 is down by -0.42%.  China’s Shanghai Composite closed down by -0.26%.  Japan’s Nikkei Stock 225 closed down by -0.32%.

Interest Rates

March 10-year T-notes (ZNH6) today are down by -6 ticks.  The 10-year T-note yield is up +1.8 bp to 4.187%.  Today's strength in stocks has curbed safe-haven demand for government debt and is weighing on T-notes.  Also, rising inflation expectations are bearish for T-notes as the 10-year breakeven inflation rate climbed to a 2.25-month high of 2.320% today. 

European government bond yields are moving higher today.  The 10-year German bund yield is up +2.5 bp to 2.844%.  The 10-year UK gilt yield is up +1.8 bp to 4.406%.

ECB Chief Economist Philip Lane said, "Our baseline scenario envisages inflation more or less at target for several years, growth close to potential, and low and declining unemployment.  In these circumstances, there is no near-term interest rate debate."

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 and data storage companies are moving higher today on renewed optimism for AI spending after TSMC on Thursday boosted its 2026 capital spending plans.  Micron Technology (MU) is up more than +7% to lead gainers in the S&P 500 and Nasdaq 100. Also, Lam Research (LRCX) is up more than +3%, and ASML Holding NV (ASML), Applied Materials (AMAT), Analog Devices (ADI), and Broadcom (AVGO) are up more than +2%.  In addition, Nvidia (NVDA), Seagate Technology Holdings Plc (STX), Marvell Technology (MRVL), and Intel (INTC) are up more than +1%. 

Power supplies are under pressure today on President Trump’s move to push for an emergency wholesale electricity auction and make tech giants pay for surging power costs.  Talen Energy (TLN) is down more than -9%, and Constellation Energy (CEG) is down more than -6% to lead losers in the S&P 500 and Nasdaq 100.  Also, Vistra (VST) is down more than -5%.

GE Vernova (GEV) is up more than +6% after Jeffries said the company will benefit from President Trump’s move to push for an emergency wholesale electricity auction and make tech giants pay for surging power costs. 

Rocket Lab Corp (RKLB) is up more than +5% after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $105. 

PNC Financial Services Group (PNC) is up more than +3% after reporting Q4 non-interest income of $2.34 billion, higher than the consensus of $2.26 billion. 

Eaton Corp Plc (ETN) is up more than +3% after HSBC upgraded the stock to buy from hold with a price target of $400. 

AutoNation (AN) is up more than +3% after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $235. 

Dave & Buster’s Entertainment (PLAY) is up more than +3% after Benchmark Co. upgraded the stock to buy from hold with a price target of $30. 

Honeywell International (HON) is up more than +1% after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $255. 

QXO Inc (QXO) is down more than -4% after seeking to raise $750 million from an overnight block trade marketed at $23.80 to $24.00 per share, below Thursday’s $25.02 closing price. 

Mosaic (MOS) is down more than -3% after saying North American phosphate market shipments are estimated down about 20% y/y in Q4. 

Regions Financial (RF) is down more than -3% after reporting Q4 EPS of 58 cents, weaker than the consensus of 62 cents.

State Street (STT) is down more than -3% despite reporting better-than-expected Q4 EPS after it said it sees full-year expenses this year up 3% to 4%.

Kraft Heinz Co (KHC) is down more than -2% after Morgan Stanley downgraded the stock to underweight from equal weight with a price target of $24. 

HP Inc (HPQ) is down more than -1% after Barclays downgraded the stock to underweight from equal weight with a price target of $18.

JB Hunt Transport Services (JBHT) is down more than -1% after reporting Q3 sales of $3.10 billion, below the consensus of $3.11  billion. 

Molson Coors Beverage Co (TAP) is down more than -1% after BNP Paribas SA downgraded the stock to underperform from neutral with a price target of $40. 

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).