Dollar Drops While Gold Tops $5,000, Stocks Rise: Markets Wrap
(Bloomberg) — Modest gains in stocks and bonds were overshadowed by volatility in energy, commodity and foreign exchange markets at the start of a busy week. The dollar fell to the lowest since 2022, gold topped $5,000 and natural gas jumped almost 30% as cold weather gripped much of the US.
The S&P 500 extended its January advance ahead of high-stakes megacap results. With the Federal Reserve expected to pause its rate cuts, Treasuries remained in a narrow range. The greenback slid on speculation the US could coordinate intervention with Japan to support the yen. After the close, big US insurers including UnitedHealth Group Inc., CVS Health Corp. and Humana Inc. tumbled on a report the US will hold payments to private Medicare plans flat next year.
The earnings season picks up steam this week, with companies accounting for a third of the S&P 500’s market capitalization expected to post results. Following a breakneck rally of artificial-intelligence names, those firms are under pressure to show that the vast sums they’ve committed to capital expenditures are starting to pay off in a bigger way.
While the reporting season is still in its early stages, an analysis by JPMorgan Chase & Co. shows that forward guidance has topped expectations at roughly half of the S&P 500 companies that have provided an outlook for 2026.
“Since most of the companies that have reported are outside the tech sector, this trend suggests a broadening of growth across other industries this year,” strategist Dubravko Lakos-Bujas wrote in a note.
Meantime, Fed officials are expected to hold rates steady following three straight cuts at the end of 2025 as a steadier jobs market restores a degree of consensus at the central bank after months of growing division. Chair Jerome Powell is likely to telegraph his view that policy is well-positioned for now, but refrain from signaling much about where rates are headed.
US power grids are under mounting pressure following a winter storm that unleashed deep cold and heavy snow and ice from Texas to Maine. That’s knocked an estimated 12% of US natural gas production off-line and forecasts for frigid weather caused prices to soar.
The S&P 500 rose 0.5%. The yield on 10-year Treasuries slid one basis point to 4.21%. Bitcoin jumped. The dollar fell 0.4%. The yen climbed 1%.
“The dramatic recovery in the yen suggests that actual intervention is not needed,” said Marc Chandler at Bannockburn Capital Markets.
Despite the heightened moves in currencies and metals, stock traders seemed unflustered by the potential for volatility. Equities bounced after posting the first two-week losses since June.
Enthusiasm over the most-eventful earnings week of the season has investors raising exposure to tech shares ahead of results from four of the “Magnificent Seven” megacaps, according to Jose Torres at Interactive Brokers.
“Analysts patiently await further details on AI initiatives, the pace of investment, and expected profits to better gauge whether the theme can continue to carry this bull market,” he noted.
If not, Torres says investors are geared up to keep rotating into the reacceleration trades that benefit disproportionately from rate cuts amidst faster growth.
In fact, market performance in early 2026 has been defined by broadening in equities. While the S&P 500 has climbed 1.5% this year, its equal-weighted version — which gives Dollar Tree Inc. as much clout as Apple Inc. — is up around 4%.
History demonstrates three potential paths to an extended period of broadening, according to Ben Snider at Goldman Sachs Group Inc. Those would be: a “catch down” collapse in the valuations of the largest stocks, a broad-based “catch up” increase in valuations across the market, or a market broadening driven by earnings broadening.
“Our forecast for economic acceleration in early 2026 points to the third scenario as the most likely near-term outcome,” he said. “The ultimate degree of equity market broadening will depend on the degree of earnings broadening.”
Snider continues to recommend select consumer stocks, companies with exposure to non-residential construction, and small caps as opportunities.
Strong earnings growth is expected to continue in 2026, with estimates calling for nearly 15% growth and all 11 sectors projected to post positive results, according to Angelo Kourkafas at Edward Jones.
“Broad‑based earnings growth paired with a healthy macroeconomic backdrop helps support a diversified approach to equity sector positioning in US stocks,” he said.
The strategist recommends overweight positions in the consumer discretionary, health care, and industrials sectors — offset by underweights in consumer staples and utilities.
Small caps ended their historic relative outperformance streak on Friday, though fundamental tailwinds remain supportive over the intermediate term driven by positive operating leverage and improving pricing power, according to Michael Wilson at Morgan Stanley.
Wilson reiterated conviction in his bullish small-cap view over the next three to six months as relative earnings revisions strength is not showing signs of letting up, particularly in cyclical pockets – consumer, industrials, financials and energy.
“Unless the US dollar continues to move significantly lower, which seems unlikely, small caps, the broadening out trade and rest of world stocks should be fine,” said Dennis DeBusschere at 22V Research. “The macro tailwinds of the broadening out trade are unchanged.”
Investors appear a little more willing at the start of the year to rebalance at least some of their positioning away from the AI trade, and toward asset categories, sectors, industries, and companies that are more exposed to the “real” economy, according to Anthony Saglimbene at Ameriprise.
“Unless reports from Magnificent Seven companies materially reset the earnings outlook (which we believe will not be the case), the early-year preference for small caps and non-tech cyclicals could remain intact,” he said.
Big tech has led the stock market higher for much of the past three years. But that reversed at the end of 2025 as Wall Street grew skeptical of the billions of dollars the companies are spending to develop AI and when the returns on those investments will materialize.
“This is a big week with megacap earnings and the FOMC,” said Jonathan Krinsky at BTIG. “Getting through that without any major hiccups should see some volatility compression, which would be another tailwind.”
This week’s lineup of megacap earnings should help shape sentiment around the AI trade, but Wednesday’s Fed announcement will likely keep politics in the headlines, according to Chris Larkin at E*Trade from Morgan Stanley.
“Even though the Fed isn’t expected to cut interest rates, Powell’s press conference may be as much about Fed independence as it is policy,” he said.
Expectations about Fed policy have been shifting in response to changes in the consensus view on whom President Donald Trump will nominate to succeed Powell, whose term expires in May.
Trump has been saying since June that his decision on a successor was down to four or fewer candidates and would be announced soon. During that time, prediction markets have favored several in turn as the likely nominee, with BlackRock executive Rick Rieder currently leading.
The biggest question for the Fed in 2026 will be the timing of its single projected rate cut, according to Stephen Kates at Bankrate.
“I expect Chair Powell to remain tight-lipped about any definitive plans in order to preserve maximum flexibility for both the committee and his successor,” he said. “While concerns about the balance of risks between inflation and the labor market have eased slightly, achieving success on both fronts will still require careful judgment.”
Meantime, ongoing tensions between the Fed and the White House elevate what might otherwise have been a quiet January meeting into a more sensational event, Kates noted.
“Our base case remains that the Fed will remain on hold in coming months, with no additional cuts on the horizon,” said David Doyle at Macquarie Group.
A key risk to this view, Doyle noted, is the potential for an incoming Fed Chair to sway the committee in a more dovish direction.
“However, we believe this risk is mitigated by a potential shift in the new Chair’s incentives once they assume the role,” he said.
Policymakers have signaled that easing may still be appropriate at some point later this year, although any action would remain dependent on how economic conditions evolve, according to Jason Pride and Michael Reynolds at Glenmede.
“The Fed’s dual mandate remains finely balanced,” they said. “Inflation has cooled substantially from its 2022 peak but still sits near the upper edge of what officials would likely view as price stability, while the unemployment rate has edged higher.”
Taken together, the Fed, highly attuned to incoming data, is likely to keep rates unchanged over the next several meetings before adding one or two more cuts later in the year, they noted.
Meantime, hedge fund Bridgewater Associates favors stocks over bonds given the risks posed by governments ramping up public spending and the inflationary impact of AI.
“It depends on how willing buyers are to hold an ever-expanding supply of debt and what it takes to entice the next marginal buyer,” Bob Prince, Greg Jensen and Karen Karniol-Tambour wrote in a note. There is “no magic number” that determines what level of debt or deficit is sustainable, but many developed world economies are “getting dangerously close” to such limits.
DoubleLine Capital LP is reining in its corporate-debt buying, fearing that an already frothy market is growing more perilous as richly valued companies prepare for record borrowing to fund the artificial intelligence boom and acquisitions.
“This year is going to be the risk-building year,” said Robert Cohen, director of global developed credit at DoubleLine. “You have more risk, less spread. It’s the worst scenario.”
Corporate Highlights:
Nvidia Corp., the dominant maker of artificial intelligence chips, invested an additional $2 billion in CoreWeave Inc. to help speed up an effort to add more than 5 gigawatts of AI computing capacity by 2030. Nvidia is offering new open-source software and models designed to help governments and businesses more easily use artificial intelligence and complex data to build their own weather forecasting systems. Microsoft Corp. is rolling out its second-generation artificial intelligence chip, the centerpiece of the company’s push to power its services more efficiently and provide an alternative to Nvidia Corp. hardware. Apple Inc. unveiled an upgraded AirTag accessory, with the $29 item finder now offering longer range, a louder speaker and other improvements. Oracle Corp. predicted that a massive data center it’s developing for OpenAI in New Mexico will create more jobs than previously announced, another example of tech companies trying promote positive impacts of server farms. GameStop Corp. rallied after Michael Burry, the money manager made famous by The Big Short, wrote that he has been buying the stock. Goldman Sachs Group Inc. sold a $2.5 billion US investment-grade bond on Monday, less than two weeks after the firm’s $16 billion sale set a record for a Wall Street bank. Merck & Co. is no longer in talks to acquire biotech firm Revolution Medicines Inc. after the two companies couldn’t agree on a price, the Wall Street Journal reported, citing people familiar with the matter. Chevron Corp. has assembled its largest fleet of vessels in almost a year to ship Venezuelan crude, after the US moved to exert control over the country’s oil sector following the capture of leader Nicolas Maduro. Baker Hughes Co., one of the world’s biggest oilfield contractors, said it plans to double its data center equipment order target to $3 billion over a three-year period, driven by surging demand for power to run artificial intelligence. Apollo Global Management Inc. took a roughly $170 million hit after an asset-backed financing for Amazon brand aggregator Perch was wiped out, a rare stumble for a strategy touted as one of private credit’s safest and most promising. USA Rare Earth Inc. signed a non-binding agreement with the Commerce Department for $1.6 billion in funding, the latest White House deal to boost production of rare-earth elements on domestic soil. Quantum computing firm IonQ Inc. has agreed to buy SkyWater Technology Inc. in a cash-and-stock deal that values the chipmaker at about $1.8 billion. Ryanair Holdings Plc slightly increased some key targets for the full fiscal year, disappointing those investors hoping for a more robust outlook and joining some major US carriers in projecting caution because of geopolitical tensions. Airbus SE is preparing its employees for a turbulent year ahead as geopolitical tensions between the US and other countries hang over the start of 2026. Volkswagen AG’s plans for a possible Audi factory in the US aren’t progressing as President Donald Trump’s tariffs weigh and talks for local incentives haven’t yielded results, Chief Executive Officer Oliver Blume told Handelsblatt. The split between Pirelli & C. SpA’s two biggest investors widened when a proposal by China’s Sinochem Group aimed at addressing the tiremaker’s US regulatory risks was rejected by its top Italian owner. Wizz Air Holdings Plc’s UK subsidiary applied for permission to fly to the US, months after the budget carrier’s plans to expand in the Middle East fell through. Abu Dhabi National Oil Co. is increasing its stake in the Rio Grande LNG project in Texas as part of a strategy by the UAE to grow international gas assets and do more business with the US. A Zijin Mining Group Co. subsidiary agreed to buy Allied Gold Corp., which owns gold mines in Africa, for C$5.5 billion ($4 billion) in the latest step in the Chinese company’s rapid growth. What Bloomberg strategists say…
“Traders are taking last week’s rate check as a sign that Washington is comfortable with — perhaps even actively supportive of — a weaker US dollar, leading to an accelerating decline in the currency on Monday. The moves are starting to read as broader de-risking in the greenback, given they’re no longer confined to just the euro complex.”
— Brendan Fagan, Macro Strategist, Markets Live. For the full analysis, click here.
Stocks
S&P 500 futures rose 0.5%, climbing for the fourth straight day, the longest winning streak since Dec. 24, 2025 as of 4:34 p.m. New York time Futures on the Dow Jones Industrial Average rose 0.4% The MSCI World Index rose 0.7% to a record high Currencies
The Bloomberg Dollar Spot Index fell 0.4% to the lowest in about four years The euro rose 0.4% to the highest in more than four years The British pound rose 0.2% to the highest in about seven months The Japanese yen rose 1% to the highest since Nov. 11, 2025 Cryptocurrencies
Bitcoin surged 1.6%, more than any closing gain since Jan. 14, 2026 Ether surged 3.3%, more than any closing gain since Jan. 14, 2026 Bonds
The yield on 10-year Treasuries declined one basis point to 4.21% Germany’s 10-year yield declined four basis points to 2.87% Britain’s 10-year yield declined one basis point, more than any closing decline since Jan. 14, 2026 Commodities
West Texas Intermediate crude fell 0.5% to $60.76 a barrel Spot gold rose 0.5% to the highest on record This story was produced with the assistance of Bloomberg Automation.
©2026 Bloomberg L.P.
