Markets shrug off Fed probe to close at fresh highs

General market commentary

U.S. equity markets ended the session higher, shaking off early weakness as investors appeared largely unfazed by renewed concerns around Federal Reserve independence. The S&P 500 and Dow Jones Industrial Average each rose 0.2% to fresh record highs, while the Nasdaq Composite added 0.3%. Gains were broad-based, with most sectors finishing in positive territory, led by consumer staples and industrials. Investor sentiment improved despite reports of a criminal investigation involving Fed Chair Jerome Powell, suggesting markets view the likelihood of any near-term disruption to monetary policy as low.

Financials were a notable drag on performance, weighed down by concerns over President Trump’s proposal to cap credit-card interest rates at 10%. Shares of several credit-card issuers and large banks fell sharply, with Synchrony Financial among the worst performers. Outside equities, Treasury yields moved higher and the U.S. dollar weakened, while gold and silver surged to new highs amid heightened geopolitical uncertainty. Overall, equity markets appeared focused on underlying earnings prospects and diversification benefits rather than political noise, as the U.S. earnings season begins later this week.

Latest market and economic update

Asian equities mostly advanced, led by strong gains in technology shares on continued optimism around artificial intelligence. Japan’s Nikkei surged to a record high on catch-up buying and expectations of fiscal stimulus linked to a potential snap election. Hong Kong and mainland China rose on renewed enthusiasm for AI-related listings.

U.S. equities futures dipped slightly overnight as investors awaited December CPI inflation data, while tech shares eased after Trump said Microsoft and other AI data centre firms must absorb higher utility costs. Markets continue to monitor the Trump-Powell feud over Fed independence, with record highs in major shares supported by earlier tech gains ahead of Q4 earnings.

European shares closed slightly higher on Monday, with the STOXX 50 up 0.2% to 6,010 and STOXX 600 up 0.2% to 610, as positive macro sentiment outweighed geopolitical and Fed concerns. Industrials and financials led gains, with Siemens, Airbus, Deutsche Bank and BBVA up 1 to 4%, while tech rose, led by Prosus 3.7%, ASML and Infineon.

The dollar remained under pressure on Tuesday following the Trump administration’s criminal investigation into Fed Chair Powell, which raised concerns over central bank independence. In Asia trade, the euro held steady at $1.1663, near Monday’s gains, while the dollar index was slightly lower. Treasury yields eased, reflecting measured market caution amid political uncertainty.

Oil prices climbed for a fourth session in Asian trade as escalating anti-government protests in Iran raised fears of supply disruptions, lifting Brent and WTI toward multi-week highs. Geopolitical risk from Iran outweighed expectations of Venezuelan exports returning to market, while concerns over pipeline disruptions linked to regional conflict added to tightness perceptions.

New York Fed President John Williams expects a healthy 2026 economy, forecasting GDP growth of 2.5–2.75% and inflation easing to 2.5% by year-end, reaching 2% by 2027. He sees no near-term need for interest-rate cuts and warned that political or legal attacks on central bank independence, including the probe into Powell, could risk higher inflation and broader economic instability.

Equities on the move

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

President Trump said his administration is working with major U.S. tech firms, starting with Microsoft, to ensure rising utility costs from AI data centres do not affect household bills. The initiative aims to maintain U.S. AI leadership while addressing public concerns over power, water, and environmental impacts, with companies promising to absorb their own energy expenses.

Apple has confirmed a multi-year partnership with Google to use its Gemini technology for next-generation Apple Foundation Models. The deal will support new Apple Intelligence features, including a more personalised Siri later this year, while Apple continues to prioritise user privacy through on-device processing and Private Cloud Compute.

Alibaba shares surged over 10% on Monday as China announced plans to accelerate digital and AI integration in manufacturing. The government will support “little giant” firms, boost R&D, and advance technologies including quantum computing, humanoid robots, brain-computer interfaces, and 6G, while improving production capacity management and curbing inefficient competition.

Eli Lilly plans a near-simultaneous global launch of its new weight-loss pill, orforglipron, priced at $150 per month, ahead of expected U.S. approval. The pill offers greater convenience than Novo Nordisk’s oral option, can serve as a maintenance therapy post-injectables, and will be sold via Lilly’s direct-to-consumer programme, Lilly Direct.

Merck raised its long-term outlook, projecting $70 billion in revenue from new growth drivers by the mid-2030s. Cardiometabolic and respiratory treatments are now expected to generate $20 billion, up from $15 billion, while infectious disease drugs are forecast to contribute $15 billion, a significant increase from the prior $5 billion estimate.

Abercrombie & Fitch raised its full-year capital expenditure forecast to $245 million while narrowing net sales growth to at least 6% and trimming the operating margin to 13%. Full-year EPS is now $10.30–$10.40. Q4 sales are projected to grow 5%, EPS $3.50–$3.60, with operating margin steady at 14%. Shares dropped over 17%.

Lululemon raised its Q4 revenue and EPS guidance, expecting net revenue near the top of its $3.50–$3.585 billion range and diluted EPS close to $4.76, boosted by strong holiday trading. The company maintained gross margin and expense forecasts. Shares rose 0.1% after initially jumping 4%, while analysts note steady performance amid uneven apparel demand.

Airbus delivered 793 aircraft in 2025, up 4% and surpassing its revised target, maintaining its lead over Boeing. Net orders totalled 889. While deliveries of the A320neo rose, wide-body A350 shipments remained flat, and A220 deliveries surged 24%. Supply chain issues, particularly with Pratt & Whitney engines, continue to challenge production.

Duolingo shares fell 8.5% after announcing a CFO transition, with Gillian Munson replacing Matt Skaruppa on 23 February. Despite reporting 30% YoY daily active user growth and bookings at the top of guidance ($329.5–$335.5 million), investors reacted negatively to the leadership change and the company’s focus on product investment over near-term profits.

CoreWeave shares rose over 12% yesterday after CEO Michael Intrator addressed criticisms on GPU lifespan during a podcast. The gains coincided with Moody’s projecting $3 trillion in data-centre investments and the company’s plans to add NVIDIA Rubin to its AI cloud. Goldman Sachs initiated coverage with a Neutral rating and $86 target.

Exxon Mobil remains interested in visiting Venezuela and is prepared to send a technical team to assess oil infrastructure despite President Trump’s public rebuke after its CEO described the country as “uninvestable” without legal and investment protections. Trump said he might keep Exxon out of his push for US oil investment in Venezuela, where unresolved debts and reform challenges persist.

Bank of America and Wedbush are bullish on Apple for 2026, citing strong iPhone demand, double-digit services growth, and AI initiatives like Gemini-enhanced Siri. Analysts expect Q1 revenue of $140 billion, EPS of $2.69, rising margins, and a foldable iPhone. Potential $100-per-share upside supports Buy and Outperform ratings, with targets of $325–$350.

HSBC initiated Netflix coverage with a Buy rating and $107 target, citing a 33% pullback, strong earnings, and international growth potential. The bank sees deepening monetisation, improving profitability, and a Netflix–Warner Bros. Discovery deal as strategically compelling, potentially boosting 2028–29 earnings 2–4% and expanding premium content offerings.

Analysts are increasingly bullish on TSMC, citing strong AI demand and advanced-node capacity. HSBC raised its price target to NT$2,300, Bank of America to NT$2,150, highlighting robust pricing power, earnings growth, and margin expansion. Forecasts point to a 36% EPS CAGR through 2027, supported by 3nm–2nm chips and advanced packaging demand.

B Riley upgraded Airbnb to Buy, raising its price target to $170, citing strong growth visibility, margin expansion, and secular demand in short-term rentals. Key drivers include international expansion, “reserve now, pay later” rollout, added hotel inventory, and AI efficiencies. The brokerage forecasts $100 billion bookings, $13.6 billion revenue, and $4.9 billion EBITDA for 2026.

Investor Michael Burry, famed for his 2008 housing market bet, has taken a bearish stance on Oracle, holding put options and short positions, citing concerns over the company’s strategy, investments, and data-centre expansion. The move follows volatility linked to AI cloud forecasts and debt worries. Burry avoids shorting larger tech firms like Meta, Alphabet, and Microsoft.

Analysts are split on Datadog’s 2026 outlook. Goldman Sachs downgraded to Sell, citing rising competition and margin pressure, with a $113 target. Morgan Stanley upgraded to Overweight at $180, citing stronger core growth, cloud migration, AI-driven demand, and new products, forecasting 23% revenue and 25% free cash flow CAGR through 2028.

Upcoming data and events

Key U.S. economic releases on Tuesday include December CPI and core inflation, New Home Sales for September and October, the NFIB Business Optimism Index, and the monthly budget statement. Major company earnings reports are due from JPMorgan Chase, Bank of New York Mellon, and Delta Air Lines.

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