Fed policymakers split over next moves on rates

General market commentary

US equity markets extended their advance on Wednesday, with all three major indices closing firmly in positive territory as investors digested a heavy run of economic data and the latest Federal Reserve minutes. The S&P 500 rose 0.6 per cent to finish at 6,881.3, marking its third consecutive gain, while the Dow Jones Industrial Average added 0.3 per cent to 49,662.7. The Nasdaq Composite outperformed, climbing 0.8 per cent to 22,753.6, supported by strength in large cap technology and growth stocks. Market breadth was broadly constructive, with most sectors ending higher. Energy led the gains, aided by a sharp rise in oil prices, and consumer discretionary also performed well. In contrast, utilities and real estate lagged as Treasury yields moved higher over the course of the session.

The move in equities came alongside firmer bond yields, with the 10 year US Treasury yield rising to around 4.09 per cent and the 2 year yield to roughly 3.47 per cent, reflecting stronger than expected readings on durable goods orders and industrial production. Housing starts also surprised to the upside, reinforcing the narrative of underlying economic resilience. Meanwhile, minutes from the Federal Reserve’s late January meeting suggested policymakers remain cautious on the pace of further rate cuts, citing ongoing inflation concerns even as labour market conditions stabilise. In commodity markets, oil prices surged by nearly 5 per cent amid reports that US Iran talks have stalled, adding a geopolitical risk premium and further supporting energy shares.

Latest market and economic update

Asian equities advanced, led by technology stocks, as investors looked beyond hawkish US Federal Reserve signals. South Korea’s KOSPI surged to a record high, driven by strong gains in Samsung and SK Hynix. Australia’s ASX 200 also reached a peak, supported by miners and banks. Japan, Singapore and India posted solid gains

US stock index futures were largely flat overnight, with S&P 500, Nasdaq 100 and Dow futures slipping slightly amid uncertainty over the Federal Reserve’s next steps on interest rates. After-hours trading saw notable moves in individual stocks, including DoorDash and Carvana, as investors awaited Walmart’s fourth-quarter earnings and monitored geopolitical tensions with Iran.

European equtiies rose on Wednesday, with the Stoxx 600 up 1.2% and Italy’s FTSE MIB gaining 1.3%. Germany’s DAX remained flat. Key movers included Bayer, down 7.2% on Roundup litigation provisions, while Glencore, BAE Systems, Orange, and Euronext saw gains, supporting sectors from energy to telecommunications and financials across the region.

The US dollar hovered around 97.7, supported by strong economic data and hawkish signals from the Federal Reserve. Industrial production, core capital goods orders, and housing starts all exceeded expectations, bolstering the currency. The euro traded at 1.1786, while markets trimmed expectations for rate cuts, still anticipating two reductions before year-end.

Oil prices edged higher in Asian trade after surging more than 4 per cent previously, supported by US Iran tensions and stalled Russia Ukraine talks. A surprise draw in US crude inventories added support. However, thin holiday trading and uncertainty over global demand and US monetary policy kept investors cautious ahead of PCE inflation data.

Minutes from the Federal Open Market Committee January 2026 meeting showed broad support for holding rates at 3.5%–3.75% after three cuts, citing solid growth, steady unemployment and elevated inflation. Officials were divided on next steps, while uncertainty surrounds Donald Trump’s nomination of Kevin Warsh and scrutiny of Jerome Powell.

US durable goods orders fell 1.4% month on month in December 2025, less than the 2% expected, after November’s revised 5.4% surge. The decline was driven by a sharp drop in non-defence aircraft. Excluding transport, orders rose 0.9%. Core capital goods increased 0.6%, while overall orders were up 7.8% year on year.

An Axios report suggested the Donald Trump administration is preparing for possible military action against Iran. Talks remain stalled despite recent diplomacy, while a major US military buildup is under way. Sources said any strike could become a weeks-long joint US-Israeli campaign, with one adviser citing a 90% chance of action soon.

President Donald Trump said US tariffs had reduced the trade deficit by 78 per cent and predicted it would move into surplus territory in 2026. Although the deficit narrowed sharply from its March peak, it widened again in November. Despite weaker imports from China, higher imports from other countries keep the annual deficit elevated.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

Booking Holdings beat fourth-quarter profit estimates, reporting $48.80 per share versus $48.47, supported by strong international travel demand. Revenue reached $6.35 billion, with gross bookings up 16%. US travellers remained cautious on discretionary spending. The company approved a 25-to-1 stock split and expects mid-teen adjusted earnings growth for 2026.

Moody’s shares rose over 6% after the firm reassured investors on the proprietary nature of its data and forecast full-year adjusted profit of $16.40–$17.00 per share, above analysts’ $16.38 estimate. Its MIS unit reported a 17% rise in fourth-quarter revenue to $946 million, while peer S&P Global shares also gained amid AI-related market optimism.

DoorDash forecast Q1 adjusted EBITDA of $675–$775 million, below Wall Street estimates, citing tech platform overhaul, lower Deliveroo contributions, US storms, and regulatory costs. Q4 profit missed at 48 cents per share. Marketplace gross order value rose 39% to $29.68 billion, with 32% more orders, despite cautious consumer spending.

eBay forecast Q1 revenue of $3–$3.05 billion, exceeding Wall Street estimates of $2.8 billion, as its focus on specialty categories such as luxury goods and auto parts supports growth in a challenging e-commerce market. Shares rose 3.5% after a 40% gain last year. eBay will also acquire Depop from Etsy for $1.2 billion in cash.

Snap shares rose 3% after its subscriber base surpassed 25 million, up around 1 million since the Q4 earnings report. The milestone underscores strong growth in Snap’s subscription business, while its direct revenue has exceeded a $1 billion annualised run rate, reflecting the company’s successful expansion of monetisation beyond traditional advertising channels.

Pinterest raised its Q1 revenue forecast to $958–$978 million, boosted by the tvScientific acquisition, lifting shares over 3%. Adjusted EBITDA guidance was cut to $163–$183 million due to integration costs. The deal enhances Pinterest’s CTV and AI-driven advertising, expanding automated media buying and cross-screen attribution.

Garmin forecast 2026 revenue of $7.9 billion and adjusted EPS of $9.35, surpassing Wall Street estimates, sending shares up 9%. Strong demand for high-end fitness wearables, including Venu 4 and Bounce 2, boosted Q4 revenue 17% to $2.12 billion, with adjusted profit of $2.79 per share, supported by diverse sales channels and manufacturing flexibility.

Meta Platforms plans to launch a smartwatch later this year, alongside upcoming augmented reality glasses, The Information reported. Development was paused in 2022 due to cost-cutting, but renewed interest in AI and wearables has revived the project. Meta’s AI smartglasses, made with EssilorLuxottica, shipped nearly six million units in 2025.

Tempus AI, Inc. shares over 6% after launching its HRD-RNA algorithm for cancer detection. The AI-driven 1,660-gene model assesses Homologous Recombination Deficiency in real time via RNA expression, improving prediction of patient response to platinum-based chemotherapy or PARP inhibitors. Clinical availability is expected later this year.

Freeport McMoRan has reached agreement with the Indonesian government to extend operating rights at the Grasberg copper and gold mine for the life of the resource. The deal secures long term access, preserves existing governance arrangements, maintains its stake until 2041, and includes higher exploration spending, subject to final licence approval.

Citigroup has completed the sale of its former Russian subsidiary, AO Citibank, to Renaissance Capital, marking Citigroup’s full exit from Russia. The bank, renamed RenCap Bank, will operate under Renaissance Capital, maintaining a separate business unit and continuing to serve traditional clients across the US, UK, EU, and other international markets.

Analysts at Yardeni Research said an AI-fuelled stock market bubble is now “much less likely.” Forward P/E for S&P 500 tech fell to 23.7 from over 30, reflecting rotation away from the “Magnificent 7” into other US and global equities. They noted broad market surges or meltdowns remain muted amid portfolio rebalancing.

Amazon was named Top Pick by Morgan Stanley, highlighting under-appreciated AI-driven growth in AWS and Retail. Analyst Brian Nowak cited durable AWS demand, improving capital efficiency, and expanding agentic commerce with AI agents. Shares trade at 19x 2027 EPS, with a $300 price target implying roughly 50% upside potential.

Palantir was upgraded to Outperform by Mizuho, citing rapid revenue growth, accelerating momentum, and expanding margins. Analysts highlighted strong US commercial segment uptake of its AI Platform and long-term opportunities in AI, government digital transformation, and industrial modernisation. Price target remains $195 after EV/FCF multiple re-rating.

Snowflake shares have fallen over 30% since Q3 results, but Citi analyst Tyler Radke maintained a Buy rating, citing strong AI-resistant consumption, robust growth in Cortex and Snowflake Intelligence, and major AI partnerships with Anthropic, OpenAI and Google Gemini. FY27 revenue is expected to grow mid-to-high 20%, slightly above consensus estimates.

Upcoming data and events

Today’s US economic calendar features jobless claims, trade and balance of payments data, pending home sales, Philly Fed indices, wholesale and retail inventories, and EIA energy stock reports. Key earnings releases include Walmart, Alibaba, Nestlé, Airbus, Rio Tinto, Deere, Newmont, Southern Company, and Constellation Energy.

This information is provided solely for educational and informational purposes and should not be construed as investment advice, advice on specific investments or investment decisions, tax advice, legal advice, or any other form of professional or regulatory advice. The information does not take into account your personal circumstances and is provided to you on the express understanding that it does not constitute advice and should not be relied upon in making any investment decision. Investing in financial instruments involves risk. You should conduct your own research before making any investment decisions and seek the assistance of a licensed financial advisor if you are unsure. No person should act on any opinion or information contained in this document without first obtaining appropriate professional advice. Calamatta Cuschieri Investment Services Limited does not accept liability for any actions, proceedings, costs, demands, expenses, damages, or losses suffered as a result of reliance on the information herein.