The S&P 500 Index ($SPX) (SPY) on Friday closed down -0.06%, the Dow Jones Industrials Index ($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 an early advance on Friday and settled 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 Chair. Hassett was seen by markets 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, dampened speculation about future Fed rate cuts, pushed bond yields higher, and weighed on stocks.
Stocks initially moved higher on Friday, led by strength in chipmakers. 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.
Friday’s US economic news was mixed for stocks. 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. Conversely, the Jan NAHB housing market index unexpectedly fell -2 to 37, weaker than expectations of an increase 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 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 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 settled lower on Friday. The Euro Stoxx 50 closed down by -0.19%. 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) on Friday closed down by -15 ticks. The 10-year T-note yield rose +5.6 bp to 4.225%. Mar T-notes tumbled to a 4.75-month low on Friday, and the 10-year T-note yield rose to 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. Also, the unexpected increase in Dec manufacturing production is hawkish for Fed policy and is undercutting T-notes.
Losses in T-notes accelerated on Friday after President Trump 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 Friday. The 10-year German bund yield rose +1.6 bp to 2.835%. The 10-year UK gilt yield rose +1.2 bp to 4.400%.
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. Super Micro Computer closed up more than +10% to lead gainers in the S&P 500, and Micron Technology (MU) closed up more than +7% to lead gainers in the Nasdaq 100. Also, Applied Materials (AMAT), Lam Research (LRCX), Broadcom (AVGO), and ASML Holding NV (ASML) closed up more than +2%. In addition, Advanced Micro Devices (AMD), KLA Corp (KLAC), Seagate Technology Holdings Plc (STX), and Texas Instruments (TXN) closed 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) closed down more than -11%, and Constellation Energy (CEG) closed down more than -9% to lead losers in the S&P 500 and Nasdaq 100. Also, Vistra (VST) closed down more than -7%, and NRG Energy (NRG) closed down more than -4%.
State Street (STT) closed down more than -5% despite reporting better-than-expected Q4 EPS after it said it sees full-year expenses this year up 3% to 4%.
Mosaic (MOS) closed down more than -4% after saying North American phosphate market shipments are estimated to be down about -20% y/y 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, below Thursday’s $25.02 closing price.
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 Co (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 to underweight from equal weight with a price target of $24.
JB Hunt Transport Services (JBHT) closed down more than -1% after reporting Q3 sales of $3.10 billion, below the consensus of $3.11 billion.
GE Vernova (GEV) closed 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) closed up more than +6% after Morgan Stanley upgraded the stock to overweight from equal weight 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 Q4 non-interest income of $2.34 billion, higher than the consensus of $2.26 billion.
Dave & Buster’s Entertainment (PLAY) closed up more than +2% after Benchmark Co. upgraded the stock to buy from hold with a price target of $30.
Honeywell International (HON) closed up more than +2% after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $255.
Earnings Reports(1/20/2026)
3M Co (MMM), DR Horton Inc (DHI), Fastenal Co (FAST), Fifth Third Bancorp (FITB), Interactive Brokers Group Inc (IBKR), KeyCorp (KEY), Netflix Inc (NFLX), United Airlines Holdings Inc (UAL), US Bancorp (USB).
