US stock markets experienced mixed performance on Thursday, with major indexes struggling to maintain momentum from the previous day’s surge. This volatility came amidst a backdrop of significant bank earnings reports, a decline in technology stocks, and the Senate confirmation hearing for Scott Bessent, President-elect Donald Trump’s nominee for Treasury Secretary.
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The S&P 500 index fell approximately 0.2%, while the Dow Jones Industrial Average dipped by more than 0.1%. The tech-heavy Nasdaq Composite experienced a more significant decline, falling nearly 0.9%, primarily driven by underperformance in large-cap tech companies like Nvidia and Tesla.
This market activity followed a substantial one-day rally triggered by a lower-than-anticipated consumer inflation report, raising questions about the extent to which interest-rate cut expectations had been priced out. Wednesday’s robust market performance was fueled by this encouraging inflation data and strong earnings from major US banks. Consequently, traders have increased their bets on the Federal Reserve lowering interest rates before July, reversing the trend initiated by the surprisingly strong December jobs report.
Key Economic Data and Corporate Earnings
December retail sales figures indicated a 0.4% increase, slightly below the 0.6% expectation and a slowdown from November’s 0.7% growth.
Bank of America reported a more than twofold increase in fourth-quarter profit, benefiting from a resurgence in Wall Street dealmaking that also bolstered earnings for competitor banks. Bank of America’s shares saw a less than 1% decline, while Morgan Stanley’s stock surged over 4% following a significant increase in quarterly profit.
In contrast, UnitedHealth’s fourth-quarter revenue missed estimates due to weakness in its health insurance division, resulting in a roughly 6% stock decline. Taiwan Semiconductor Manufacturing Company (TSMC) reported strong earnings, exceeding expectations and providing a positive revenue outlook for 2025, despite new US export restrictions.
Bessent’s Confirmation Hearing
The Senate Finance Committee’s hearing on Scott Bessent’s confirmation for Treasury Secretary also drew considerable attention. Key topics discussed during the hearing included tariffs, national debt concerns, and tax policy proposals. Bessent expressed support for stronger sanctions against Russia to resolve the Ukraine conflict and acknowledged the US’s spending problem. He also emphasized the potential for a new economic “Golden Age” under President Trump.
Market Sentiment and Outlook
Investor sentiment, as measured by the AAII Investor Sentiment Survey, reached its lowest point since November 2023. This shift reflects growing concerns about inflation, rising Treasury yields, and the potential impact of President-elect Trump’s policies on the economy.
Despite positive inflation data in December, experts caution that the US economy is not entirely “out of the woods” yet, citing persistent inflationary pressures in key areas like housing and core services. The upcoming change in administration and the potential for policy shifts under President Trump further complicate the economic outlook and the Federal Reserve’s decision-making process regarding interest rates.
In conclusion, the US stock market exhibited fluctuating performance influenced by corporate earnings, tech sector weakness, and the ongoing Bessent confirmation hearing. While encouraging inflation data and strong bank earnings provided some support, lingering concerns about inflation, rising yields, and potential policy changes under the new administration contributed to market uncertainty. The coming weeks and months will be crucial in determining the direction of the market as investors navigate a complex and evolving economic landscape.
