Stocks Settle Higher as Global Tensions Cool and the Economy Expands

The S&P 500 Index ($SPX) (SPY) on Thursday closed up +0.55%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.63%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.76%.  March E-mini S&P futures (ESH26) rose +0.52%, and March E-mini Nasdaq futures (NQH26) rose +0.72%.

Stock indexes extended Wednesday’s relief rally on Thursday as President Trump's pivot on Greenland continued.  The rally gained momentum after NATO’s chief provided additional details, saying the breakthrough didn’t involve Greenland’s sovereignty.  Strength in chip makers, AI-infrastructure stocks, and the Magnificent Seven technology stocks led the broader market higher on Thursday.

Stocks held their gains on Thursday amid solid US economic news. Weekly initial unemployment claims rose by 1,000 to 200,000, beating expectations of 209,000.  Also, Q3 GDP was revised upward by 0.1 to 4.4% (q/q annualized), stronger than expectations of no change at 4.3%.  In addition, Nov personal spending rose +0.5% m/m, right on expectations, while Nov personal income rose +0.3% m/m, weaker than the +0.4% m/m expected.  Finally, the Nov core PCE price index, the Fed's preferred inflation gauge, rose +0.2% m/m and +2.8% y/y, right on expectations.

Natural-gas prices (NGG26) continued this week’s parabolic rally on Thursday, with prices up more than +3% to a 3-year high, which is boosting nat-gas producing stocks.  Prices have surged more than 60% this week as an Arctic cold front is set to bring cold temperatures to much of the eastern US, boosting heating demand and potentially leading to freeze-offs in wells and disrupting US nat-gas production.  

On Wednesday, President Trump said he would refrain from imposing tariffs on goods from European nations that oppose his effort to acquire Greenland.  NATO Secretary General Rutte said a breakthrough over Greenland was secured without discussing the territory’s sovereignty with President Trump, instead focusing on the broader issue of security in the Arctic region. 

The market’s focus this week will be on economic news and any fresh tariff developments, the next Fed Chair, and Greenland.  On Friday, the Jan S&P US manufacturing PMI is expected to be up by +0.2 to 52.0.  Also, the final University of Michigan Jan US consumer sentiment index is expected to be unrevised at 54.0. 

Q4 earnings season begins in earnest this week and, so far, has been a positive factor for stocks, with 81% of the 38 S&P 500 companies that have reported 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 Supreme Court on Tuesday did not issue a ruling on challenges to President Trump’s reciprocal tariffs.  The court did not say when it will issue its next opinions, meaning it will likely be at least another month before ruling on the tariffs, as the court begins a four-week recess. 

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 higher on Thursday.  The Euro Stoxx 50 closed up by +1.25%.  China’s Shanghai Composite rose to a 1-week high and closed up by +0.14%.  Japan’s Nikkei Stock 225 closed up by +1.73%.

Interest Rates

March 10-year T-notes (ZNH6) on Thursday closed down by -2 ticks.  The 10-year T-note yield rose by +0.6 bp to 4.249%.  Thursday's strength in stocks curbed safe-haven demand for government debt securities and weighed on T-note prices.  T-notes held modest losses after Thursday’s economic news showed weekly jobless claims rose less than expected and Q3 GDP was revised higher.  Losses in T-notes were limited after the Nov core PCE price index, the Fed's preferred inflation gauge, rose as expected.

T-notes are also under pressure after President Trump last Friday expressed reluctance to name Keven Hassett as the next Fed Chair and said he would prefer to keep him as National Economic Council director.  The markets saw Hassett as the most dovish candidate and the top contender for the Fed Chair nomination, so nominating someone like Kevin Warsh, a known hawk and the second-most-likely Fed Chair candidate, would be bearish for T-note prices.

European government bond yields moved higher on Thursday.  The 10-year German bund yield rose +0.5 bp to 2.888%.  The 10-year UK gilt yield climbed to a 2-week high of 4.495% and finished up +1.6 bp to 4.474%.

The Eurozone Jan consumer confidence index rose +0.8 to an 11-month high of -12.4, stronger than expectations of -13.0.

Swaps are discounting a 0% chance of a +25 bp rate hike by the ECB at its next policy meeting on February 5.

US Stock Movers

Chip makers and AI-infrastructure stocks rallied on Thursday, boosting the overall market.  Arista Networks (ANET) closed up more than +8% to lead gainers in the S&P 500, and ARM Holdings Plc (ARM) closed up more than +5%.  Also, ASML Holding NV (ASML) and Oracle (ORCL) closed up more than +2%.  In addition, Micron Technology (MU), Seagate Technology Holdings (STX), and Advanced Micro Devices (AMD) closed up more than +1%.

The Magnificent Seven technology stocks moved higher on Thursday.  Meta Platforms (META) closed up more than +5%, and Tesla (TSLA) closed up more than +4%.  Also, Amazon.com (AMZN) and Microsoft (MSFT) closed up more than +1%.  In addition, Nvidia (NVDA) closed up +0.83%, Alphabet (GOOGL) closed up +0.66%, Apple (AAPL) closed up +0.28%. 

Datadog (DDOG) closed up more than +6% to lead gainers in the Nasdaq 100 after Stifel upgraded the stock to buy from hold with a price target of $160.

Karman Holdings (KRMN) closed up more than +6% after Raymond James reiterated its strong buy rating on the stock and raised its price target to $130 from $100.

Northern Trust (NTRS) closed up more than +5% after reporting Q4 net interest income of $654.3 million, above the consensus of $604.5 million.

Sphere Entertainment (SPHR) closed up by more than +5% after BTIG upgraded the stock to buy from neutral, with a price target of $110. 

Venture Global (VG) closed up more than +4% after winning a dispute with Repsol SA involving the sale of liquified natural gas shipments from its export plant in Louisiana.

Elanco Animal Health (ELAN) closed up more than +2% after Piper Sandler upgraded the stock to overweight from neutral with a price target of $30.   

Abbott Laboratories (ABT) closed down more than -10% to lead losers in the S&P 500 after reporting Q4 net sales of $11.46 billion, weaker than the consensus of $11.80 billion. 

McCormick & Co (MKC) closed down more than -8% after forecasting full-year adjusted EPS of $3.05 to $3.13, below the consensus of $3.23.

General Electric (GE) closed down more than -7% after forecasting full-year adjusted operating profit of $9.85 billion to $10.25 billion, the midpoint below the consensus of $10.14 billion.

Huntington Bancshares (HBAN) closed down more than -6% after reporting a Q4 return on average assets of 0.93%, below the consensus of 1.13%. 

Mobileye (MBLY) closed down more than -3% after forecasting full-year revenue of $1.90 billion to $1.98 billion, weaker than the consensus of $2.0 billion. 

Qiagen NV (QGEN) closed down more than -2% after Deutsche Bank downgraded the stock to hold from buy.

Earnings Reports(1/23/2026)

Booz Allen Hamilton Holding Co (BAH), First Citizens BancShares Inc/ (FCNCA), SLB Ltd (SLB), Webster Financial Corp (WBS).