US equity indices retreat from highs after bank earnings

General market commentary

US equity indices fell on Tuesday as financial and consumer discretionary shares led declines following mixed earnings from large banks and a mixed inflation report. The Nasdaq Composite edged 0.1 percent lower, while the S&P 500 slipped 0.2 percent and the Dow Jones Industrial Average fell 0.8 percent. Financial equities were pressured by a sharp fall in JPMorgan Chase shares despite an earnings beat, while weakness in consumer discretionary shares added to the cautious tone. Health care also lagged the broader market, although energy and consumer staples provided some support.

Investor sentiment was shaped by economic data showing headline inflation unchanged at 2.7 percent year on year in December, with core inflation easing slightly more than expected. Treasury yields moved modestly lower, but this failed to underpin equity markets. Individual shares moved sharply on earnings, with Bank of New York Mellon rising on stronger results and Delta Air Lines falling after revenue missed guidance. Overall, equities struggled to gain traction as investors weighed easing price pressures against slowing momentum in parts of the economy.

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Asian equity markets were mixed, with Japan leading gains as shares hit record highs on speculation over increased fiscal stimulus and a weaker yen. Chinese and Hong Kong equities rose on technology and artificial intelligence optimism, while South Korean, Australian and Singaporean markets were softer, reflecting weaker cues from Wall Street.

US equity futures were steady overnight after Tuesday’s Wall Street decline. Investors awaited major bank earnings and December producer inflation data, while JPMorgan, Visa and Mastercard weighed on financial shares. Geopolitical tensions, Trump’s criticism of Fed Chair Powell, and muted reactions to NVIDIA’s China chip approval kept sentiment cautious.

European equities closed at record levels on Tuesday, supported by softer US core inflation and easing Fed concerns. Key movers included Ørsted after a US judge cleared its Revolution Wind project, along with gains for Argenx, TotalEnergies, and Siemens, while Saint-Gobain, Vinci, and Sanofi underperformed.

The U.S. dollar strengthened on Wednesday, with the dollar index near 99.2, its highest since early December. The euro traded at 1.1644 as markets digested inflation data showing core CPI easing to 0.2%. Concerns over Fed Chair Powell’s independence had little impact, while investors awaited US PPI and retail sales for further guidance.

Oil prices eased in Asian trading after recent multi week highs, as investors balanced fears of supply disruptions from Iran against a larger than expected rise in US crude inventories. Brent and WTI fell slightly following Tuesday’s strong gains, with the market now awaiting official US Energy Information Administration data to confirm crude and refined product trends.

China reported a record $1.189 trillion trade surplus in 2025, driven by strong export growth despite declining U.S. demand. Exports to Africa, Southeast Asia and the EU surged, while shipments to the U.S. fell. The yuan and equities held steady, with Beijing focused on diversifying trade partners and maintaining stable macroeconomic policies.

US annual inflation held at 2.7% in December 2025, matching expectations, with energy and used car prices easing, while food and shelter costs rose faster. Core inflation remained at 2.6%, the lowest since 2021 and below forecasts. Monthly CPI increased 0.3%, driven mainly by shelter, with core inflation at 0.2%.

Donald Trump criticised the Federal Reserve’s approach to interest rates, arguing that rates should be lowered when economic data is strong rather than raised. He said positive figures now trigger rate hikes that limit market rallies, labelled the Fed chair “a real stiff,” and claimed the US economy is already growing much faster than other major economies.

Equities on the move

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

China will restrict Nvidia’s H200 AI chip purchases to special cases, such as university R&D labs, signalling a stricter stance on the US chipmaker’s market access. The move, communicated to select companies this week, reflects Beijing’s tougher approach to reopening the Chinese market to Nvidia’s advanced AI technology.

Netflix is preparing an all cash offer for Warner Bros Discovery’s studios and streaming assets, intensifying a high profile bidding battle with Paramount. Warner Bros prefers Netflix’s deal despite Paramount’s higher cash bid, citing debt risks. Shares of both companies rose, while regulators and lawmakers express concern over media consolidation and consumer impact.

UBS CEO Sergio Ermotti, who led the Credit Suisse takeover, plans to step down by mid-2027 after completing the integration. Potential successors include Aleksandar Ivanovic, Robert Karofsky, Iqbal Khan, and COO Bea Martin. UBS shares have surged post-takeover, while the bank navigates Swiss government proposals on stricter capital rules.

U.S. Bancorp will acquire brokerage BTIG for up to $1 billion in cash and shares to strengthen its capital markets offerings. The deal adds equity capital markets, M&A advisory, and trading capabilities, boosting annual revenue by around $750 million. BTIG’s leadership will join U.S. Bancorp, with the transaction expected to close in Q2 2026.

Meta and EssilorLuxottica may double AI-powered smart glasses production to 20 million units in 2026, potentially exceeding 30 million if demand rises. Current targets near 10 million units. The expansion follows strong demand, despite Meta pausing international shipments and cutting over 1,000 Reality Labs jobs, which has lost more than $60 billion since 2020.

Novo Nordisk CEO Mike Doustdar warned of 2026 international headwinds from lost exclusivity and rising competition, especially Eli Lilly. While these markets remain key for long-term growth in weight-loss and diabetes, near-term pressure is expected, with the company relying on capacity expansion, higher-dose formulations, and new products to defend market share.

Visa and Mastercard shares fell around 5% as President Trump backed the Credit Card Competition Act, aiming to limit interchange fees and increase competition. Coupled with his call to cap interest rates at 10%, investors fear regulatory pressure could hit the payment processors’ revenue, extending recent losses for both equities.

Wolfe Research named Nvidia its top AI pick for 2026, citing scope for further upside after relative underperformance. It argues earlier concerns over product delays, AI spending and competition are fading as Blackwell ramps, Rubin remains on track, pricing power improves, revenue upside grows and valuation stays attractive versus history.

Bank of America raised Micron’s price target to $400, citing stronger DRAM pricing, limited industry capacity, and rising demand in high-bandwidth memory and data centres. The upgrade reflects a prolonged memory upcycle and expected earnings growth, with valuations at the high end of historical ranges.

KeyBanc upgraded Intel and AMD to Overweight, citing strong data-centre demand and tightening memory supply. Intel is largely sold out of server CPUs in 2026, benefiting from hyperscaler demand, higher ASPs, and improved yields, while AMD expects 50% server CPU growth and $14–15 bn in AI revenue, supported by MI355 and MI455-powered Helios shipments.

HSBC downgraded Ferrari to Hold, cutting its target to €345 and trimming 2026 EBIT forecasts by 7%, citing limited upside despite F80 ramp-up and richer product mix. Shipments are expected flat, with margins supported by Specials and mix, offset by higher Formula One costs and FX headwinds. EV Elettrica launch adds future uncertainty.

Kepler Cheuvreux upgraded Banco Santander to Buy, raising its target to €12.40, citing undervalued impact of the bank’s technology transformation. Santander plans €12.4 bn in buybacks and strong dividend distributions. Despite TSB integration delays and restructuring costs, RoTE is forecast at 18.3% in 2026, with digital platform efficiencies and Polish asset gains supporting valuation.

Bank of America turned more selective on European infrastructure in 2026. Vinci, Aeroports de Paris, Getlink, and Eiffage were downgraded, while AENA was upgraded. The bank favours US-exposed firms Hochtief, ACS, Ferrovial, and regulated networks National Grid, Elia, Italgas, citing stronger earnings visibility and pricing power.

Oppenheimer downgraded Adobe to Market Perform, citing a challenging 2026 software outlook. Slower digital media growth, AI competition, and margin pressures limit near-term upside. Despite attractive pricing, decelerating growth and execution concerns weigh on investor sentiment, with shares down over 6% in the past year.

Goldman Sachs initiated coverage of Super Micro Computer with a Sell rating and a $26 target, citing ongoing margin pressure and limited profitability visibility despite strong AI-server growth. While SMCI leads in tier-2 cloud AI servers, reliance on major suppliers, concentrated customers, and margin-dilutive deals raises concerns, with EPS forecasts below consensus.

Deutsche Bank upgraded lithium producers Albemarle, SQM, and Lithium Argentina to Buy, citing rising energy storage demand, higher prices, and tightening supply. Stronger spot and contract prices support earnings and margins, while project execution and eased JV uncertainties bolster outlooks. Higher 2026 lithium prices underpin improved cash flow and long-term growth prospects.

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In the US, attention focuses on retail sales, producer prices, existing home sales, and crude oil inventories, alongside earnings from Bank of America, Citigroup, and Wells Fargo, which may influence market sentiment and investor positioning.

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