The S&P 500 Index ($SPX) (SPY) on Wednesday closed up +1.16%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +1.21%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +1.36%. March E-mini S&P futures (ESH26) rose +1.18%, and March E-mini Nasdaq futures (NQH26) rose +1.38%.
Stock indexes rallied sharply on Wednesday, recovering over half of Tuesday’s losses, after President Trump said he reached a framework of a deal with NATO regarding Greenland. Short covering pushed stocks sharply higher on Wednesday after President Trump said he would refrain from imposing tariffs on goods from European nations that oppose his effort to take possession of Greenland.
Lower bond yields on Wednesday also helped a recovery in stocks. The 10-year T-note yield fell -4 bp to 4.25% after rising to a 4.75-month high of 4.31% on Tuesday, driven by concern about an independent Fed and negative carryover from soaring Japanese government bond yields. Japan’s 10-year JGB bond yield fell to 2.285% on Wednesday, falling back from Tuesday’s 27-year high of 2.359%.
President Trump said Wednesday that he would refrain from imposing tariffs on goods from European nations that oppose his effort to take possession of Greenland, citing a "framework of a future deal" regarding the island. Mr. Trump said, "Based upon a very productive meeting that I have had with the Secretary General of NATO, Mark Rutte, we have formed the framework of a future deal with respect to Greenland and, in fact, the entire Arctic Region."
Gold prices (GCG26) rallied another 1% on Wednesday, hitting a new record high, amid the Greenland crisis, which is prompting safe-haven buying of gold. Also, concerns that Japan's expansionary fiscal policies will lead to soaring deficits are boosting demand for gold as a store of value.
Natural-gas prices (NGG26) soared more than +24% on Wednesday to a 6-week high, adding to Tuesday’s +26% surge, which boosted nat-gas producing stocks. 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.
US MBA mortgage applications rose +14.1% in the week ended January 16, with the purchase mortgage sub-index up +5.1% and the refinancing mortgage sub-index up +20.4%. The average 30-year fixed rate mortgage fell -2 bp to 6.16% from 6.18% in the prior week.
US Dec pending home sales fell -9.3% m/m, weaker than expectations of -0.3% m/m and the biggest decline in 5.5 years.
US Oct construction spending rose +0.5% m/m, stronger than expectations of +0.1% m/m.
The market’s focus this week will be on economic news and any fresh tariff developments, the next Fed Chair, and Greenland. On Thursday, initial weekly unemployment claims are expected to climb by +11,000 to 209,000. Also, Q3 GDP is expected to be unrevised at +4.3% (q/q annualized). In addition, Nov personal spending is expected to be up +0.5% m/m, and Nov personal income is expected to rise +0.4% m/m. Finally, the Nov core PCE price index (the Fed’s preferred inflation gauge) is expected to rise by +0.2% m/m and +2.8% y/y. 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 mixed on Wednesday. The Euro Stoxx 50 closed down by -0.16%. China’s Shanghai Composite closed up by +0.08%. Japan’s Nikkei Stock 225 fell to a 1.5-week low and closed down by -0.41%.
Interest Rates
March 10-year T-notes (ZNH6) on Wednesday closed up by +7.5 ticks. The 10-year T-note yield fell by -4.4 bp to 4.249%. T-note prices move higher on Wednesday after President Trump said he reached a deal on Greenland and would not impose tariffs on European countries that opposed him. T-notes also found support after the US Dec pending home sales fell by the most in 5.5 years. Gains in T-notes accelerated Wednesday afternoon on strong demand for the Treasury’s $13 billion auction of 20-year T-bonds, which had a bid-to-cover ratio of 2.86, well above the 10-auction average of 2.64 and the highest in 2.5 years.
Gains in T-notes were limited amid rising inflation expectations, as the 10-year breakeven inflation rate rose to a 3.25-month high of 2.358% on Wednesday. Also, Wednesday’s sharp rally in stocks reduced safe-haven demand for T-notes.
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 were mixed on Wednesday. The 10-year German bund yield rose +2.4 bp to 2.882%. The 10-year UK gilt yield was unchanged at 4.458%.
ECB President Lagarde said another volley of tariffs from US President Trump would have only a "minor" impact on inflation in Europe. She added that what is more important than the tariffs themselves is the rising uncertainty caused by the tariff threats.
UK Dec CPI rose +3.4% y/y, stronger than expectations of +3.3% y/y. Dec core CPI rose +3.2% y/y, weaker than expectations of +3.3% y/y.
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 rallied on Wednesday, boosting the overall market. Intel (INTC) closed up more than +11% to lead gainers in the Nasdaq 100, and Advanced Micro Devices (AMD) closed up more than +7%. Also, ARM Holdings Plc (ARM) and Micron Technology (MU) closed up more than +6%, and Microchip Technology (MCHP) closed up more than +4%. In addition, Marvell Technology (MRVL) and Analog Devices (ADI) closed up more than +3%, and Nvidia (NVDA), Lam Research (LRCX), ASML Holding NV (ASML), KLA Corp (KLAC), Applied Materials (AMAT), and Texas Instruments (TXN) closed up more than +2%.
US natural gas-producing stocks rallied for the second day on Wednesday as the price of nat-gas rose more than +24% at a 6-week high, adding to Tuesday’s +26% surge. EQT Corp (EQT) closed up more than +6%, and Expand Energy (EXE) and Antero Resources (AR) closed up more than +4%. Also, Range Resources (RRC) closed up more than +3%, and EOG Resources (EOG), CNX Resources (CNX), and Coterra Energy (CTRA) closed up more than +1%.
Progressive Software (PRGS) closed up more than +10% after forecasting full-year adjusted EPS of $5.82 to $5.96, stronger than the consensus of $5.66.
Teledyne Technologies (TDY) closed up more than +9% after reporting Q1 net sales of $1.61 billion, above the consensus of $1.57 billion.
Nathan’s Famous (NATH) closed up more than +8% after Smithfield Foods agreed to buy the company for $102 a share.
Citizens Financial Group (CFG) closed up more than +6% after reporting Q4 total deposits of $183.3 billion, above the consensus of $180.35 billion.
Datadog (DDOG) closed up more than +5% after Bernstein said it was positive on the company, assigning an outperform rating and a $180 price target.
Albemarle (ALB) closed up by more than +4% after Truist Securities upgraded the stock to buy from hold with a price target of $205.
United Airlines Holdings (UAL) closed up more than +2% after reporting Q4 adjusted EPS of $3.10, better than the consensus of $2.92.
Kraft Heinz (KHC) closed down more than -5% after registering 325,442,152 common shares held by Berkshire Hathaway for potential sale.
Netflix (NFLX) closed down more than -2% after forecasting a full-year operating margin of 31.5%, below the consensus of 32.4%.
Southern Copper (SCCO) closed down more than -1% after UBS downgraded the stock to sell from neutral with a price target of $148.
Earnings Reports(1/22/2026)
Abbott Laboratories (ABT), Capital One Financial Corp (COF), CSX Corp (CSX), Freeport-McMoRan Inc (FCX), General Electric Co (GE), Huntington Bancshares Inc/OH (HBAN), Intel Corp (INTC), Intuitive Surgical Inc (ISRG), McCormick & Co Inc/MD (MKC), Northern Trust Corp (NTRS), Procter & Gamble Co/The (PG).
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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