Wall Street Takes a Breather as Investors Eye Earnings Reports

By Johann M Cherian and Sukriti Gupta

On Thursday, Wall Street's key indexes slowed down after a strong performance in the previous session. This pause comes after major banks reported impressive earnings, providing a boost to the market. Investors took time to review recent data, which could influence expectations regarding interest rate cuts later this year.

By midday, the Dow Jones Industrial Average rose by 26.22 points, or 0.06%, reaching 43,247.77. The S&P 500 gained 5.34 points, or 0.09%, bringing it to 5,955.25, while the Nasdaq Composite fell by 53.30 points, or 0.27%, settling at 19,457.93.

Morgan Stanley saw a rise of 3.3% in its stock price after announcing that its fourth-quarter earnings had increased significantly due to a surge in deal-making activities. In contrast, Bank of America experienced a slight decline of 1.2%, although it did predict a rise in interest income for 2025.

Investor attention also turned towards comments made by Federal Reserve Governor Christopher Waller, who mentioned that three to four interest rate cuts this year are still possible if the economic data deteriorates.

The yield on the 10-year Treasury note dropped to 4.617%, while futures markets were estimating approximately 43.5 basis points of rate cuts for 2025 following Waller's comments, an increase from the 37 basis points expected before.

Phil Blancato, CEO of Ladenburg Thalmann Asset Management, cautioned that predicting future trends under the current political administration and the potential impact of tariffs is risky. He highlighted the ongoing challenge of persistent inflation and the associated market uncertainties.

In corporate updates, seven of the eleven sectors of the S&P 500 saw gains, with utilities and real estate leading, both showing increases of over 1.5%. The equal-weighted S&P 500 index rose by 0.7%, although tech giants like Apple and Nvidia negatively impacted the Nasdaq.

Recent economic data revealed that retail sales in December rose by less than expected, while jobless claims increased more significantly than anticipated in the past week.

The previous day, Wall Street recorded its largest single-day rise since November 6, after reports indicated a decline in underlying inflation and prominent banks announced impressive earnings.

So far in January, the S&P 500 banks index and regional banks index have outperformed the overall market, as investors appear optimistic about a favorable business environment under the incoming administration. This sentiment was echoed by bank leaders during their earnings conference calls.

Out of the 28 companies in the S&P 500 that reported fourth-quarter earnings as of Wednesday, 82.1% exceeded analysts’ expectations, as per data compiled by LSEG.

UnitedHealth experienced a drop of 4.5% after reporting fourth-quarter revenues that fell short of estimates. In contrast, U.S.-listed shares of Taiwan Semiconductor Manufacturing Co increased by 4.8% after announcing a record quarterly profit.

At a Senate confirmation hearing, Treasury nominee Scott Bessent expressed support for extending the Trump administration's 2017 tax cuts.

Overall, advancing issues outnumbered declining ones on both the NYSE and Nasdaq. Specifically, there were 19 new 52-week highs and nine new lows on the S&P 500, while the Nasdaq Composite recorded 50 new highs and 84 new lows.

WallStreet, Earnings, Investors