The S&P 500 Index ($SPX) (SPY) on Wednesday closed down -0.34%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.94%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.06%.  March E-mini S&P futures (ESH26) fell -0.36%, and March E-mini Nasdaq futures (NQH26) rose +0.03%.

Stock indexes settled mixed on Wednesday, with the Nasdaq 100 posting a 3.5-week high.  The S&P 500 and Dow Jones Industrial Average fell from record highs on Wednesday and settled lower, led by weakness in chipmakers and data storage stocks. Also, defense stocks tumbled after President Trump said he won’t allow dividends or buybacks for defense companies.

Lower bond yields on Wednesday were supportive of stocks as signs of weakness in the US labor market knocked bond yields lower after the Dec ADP employment report showed private employers added fewer jobs than expected, and the Nov JOLTS report showed fewer job openings than expected, a dovish factor for Fed policy.  The 10-year T-note yield fell -3 bp to 4.14%.

Also, Wednesday’s report showing a slower-than-expected increase in Eurozone Dec core consumer prices eased inflation concerns and sent European bond yields lower, with the UK 10-year gilt yield falling to a 1.75-month low and the 10-year German bund yield falling to a 1-month low. 

Signs of strength in the US service sector are positive for economic growth and supportive of stocks after the Dec ISM services index unexpectedly rose +1.8 to 54.4, stronger than expectations of a decline to 52.2 and the strongest pace of expansion in fourteen months.

The US MBA mortgage applications rose +0.3% in the week ended January 2, with the purchase mortgage sub-index down -6.2% and the refinancing mortgage sub-index up +7.4%.  The average 30-year fixed rate mortgage fell -7 bp to 6.25% from 6.32% in the prior week.

The US Dec ADP employment change increased by +41,000, weaker than expectations of +50,000.

US Nov JOLTS job openings fell -303,000 to a 14-month low of 7.146 million, showing a weaker labor market than expectations of 7.648 million.

US Oct factory orders fell -1.3% m/m, weaker than expectations of -1.2% m/m.

The market’s focus this week will be on US economic news.  On Thursday, Q3 nonfarm productivity is expected to climb by +5.0%, and unit labor costs are expected to fall by -0.1%. Also, initial weekly unemployment claims are expected to increase by +13,000 to 212,000.  On Friday, Dec nonfarm payrolls are expected to increase by +70,000, and the Dec unemployment rate is expected to slip by -0.1 to 4.5%.  Also, Dec average hourly earnings are expected to be up by 0.3% m/m and 3.6% y/y.  In addition, Oct housing starts are expected to increase by 1.8% m/m to 1.33 million, and Oct building permits are expected to rise by 1.5% m/m to 1.35 million. Finally, the University of Michigan's Jan consumer sentiment index is expected to climb by +0.6 points to 53.5. 

The markets are discounting the odds at 14% for a -25 bp rate cut at the FOMC’s next meeting on January 27-28.

Overseas stock markets settled mixed on Wednesday.  The Euro Stoxx 50 closed down by -0.14%.  China’s Shanghai Composite climbed to a 10.5-year high and closed up by +0.05%.  Japan’s Nikkei Stock 225 closed down by -1.06%.

Interest Rates

March 10-year T-notes (ZNH6) on Wednesday closed up by +8 ticks.  The 10-year T-note yield fell -3.7 bp to 4.136%.  Signs of weakness in the US labor market are dovish for Fed policy and bullish for T-notes after Wednesday’s Dec ADP employment report showed private employers added fewer jobs than expected, and the Nov JOLTS report showed fewer job openings than expected.  Also, Wednesday’s weaker-than-expected Eurozone Dec CPI report knocked the 10-year German bund yield to a 1-month low and is providing carryover support to T-note prices.  T-note prices fell from their best levels on Wednesday after the Dec ISM services index unexpectedly expanded at the strongest pace in fourteen months, a hawkish factor for Fed policy.     

European government bond yields moved lower on Wednesday.  The 10-year German bund yield dropped to a 1-month low of 2.792% and finished down -3.0 bp to 2.812%.  The 10-year UK gilt yield fell to a 1.75-month low of 4.400% and finished down -6.4 bp to 4.416%.

Eurozone Dec CPI rose +2.0% y/y, right on expectations.  Dec core CPI rose +2.3% y/y, weaker than expectations of +2.4% y/y.

German Nov retail sales unexpectedly fell -0.6% m/m, weaker than expectations of a +0.2% m/m increase and the biggest decline in 17 months.

Swaps are discounting a 1% chance of a +25 bp rate hike by the ECB at its next policy meeting on February 5.

US Stock Movers

Chip makers and data storage companies were under pressure on Wednesday, weighing on the broader market after their sharp rally the previous day.  Western Digital (WDC) closed down more than -8% to lead losers in the Nasdaq 100. Also, Seagate Technology Holdings (STX) closed down more than -5%, and Marvel Technology (MRVL) closed down more than -4%.  In addition, Texas Instruments (TXN) closed down more than -3%, and NXP Semiconductors NV (NXPI), Advanced Micro Devices (AMD), and KLA Corp (KLAC) closed down more than -2%. 

Defense stocks tumbled on Wednesday after President Trump said he won’t allow dividends or buybacks for defense companies.  As a result, Northrop Grumman (NOC) closed down more than -5%, and Lockheed Martin (LMT) closed down more than -4%.  Also, General Dynamics (GD) closed down more than -3%, and Huntington Ingalls Industries (HII) and RTX Corp (RTX) closed down more than -2%. 

Mining stocks moved lower on Wednesday after silver fell more than -4% and copper dropped more than -3%.  Hecla Mining (HL) closed down more than -4%, and Coeur Mining (CDE) and Newmont Mining (NEM) closed down more than -1%.  Also, Barrick Mining (B) closed down -0.92%, and Freeport McMoRan (FCX) closed down -0.89%.

Cybersecurity stocks moved higher on Wednesday. Crowdstrike Holdings (CRWD), Palo Alto Networks (PANW), and Zscaler (ZS) closed up more than +3%.  Also, Atlassian (TEAM) closed up more than +2%.

Apogee Enterprises (APOG) closed down more than -13% after cutting its full-year adjusted EPS forecast to $3.40-$3.50 from a previous estimate of $3.60-$3.90, weaker than the consensus of $3.66. 

AST SpaceMobile (ASTS) closed down more than -11% after Scotia Bank downgraded the stock to underperform from sector perform with a price target of $45.60.   

StoneCo Ltd (STNE) closed down more than -6% after it announced that CEO Zinner will resign for personal reasons effective March 2026, and CFO Schere was appointed as successor. 

Deckers Outdoors (DECK) closed down more than -3% after Piper Sandler downgraded the stock to underweight from neutral with a price target of $85.

Wolverine World Wide (WWW) closed down more than -3% after Piper Sandler downgraded the stock to neutral from overweight. 

JPMorgan Chase (JPM) closed down more than -2% after Wolfe Research LLC downgraded the stock to peer perform from outperform. 

Monte Rosa Therapeutics (GLUE) closed up more than +45% after announcing positive interim data from an ongoing Phase 1 clinical study of its drug to treat elevated cardiovascular disease. 

Ventyx Biosciences (VTYX) closed up more than +37% after the Wall Street Journal reported that Eli Lilly & Co. is in advanced talks to acquire the company for more than $1 billion. 

Regeneron Pharmaceuticals (REGN) closed up more than +4% after Bank of America Global Research double-upgraded the stock to buy from underperform with a price target of $860.

Bristol-Myers Squibb (BMY) closed up more than +4% after UBS upgraded the stock to buy from neutral with a price target of $65.

Amgen (AMGN) closed up more than +3% to lead gainers in the Dow Jones Industrials after UBS upgraded the stock to buy from neutral with a price target of $380.

Strategy (MSTR) closed up more than +2% after MSCI decided, for now, to keep digital asset treasury companies in its stock market indexes.

Earnings Reports(1/8/2026)

Acuity Inc (AYI), RPM International Inc (RPM), TD SYNNEX Corp (SNX).