Dollar Drops While Gold Tops $5,000, Stocks Rise: Markets Wrap

(Bloomberg) — Big moves away from stocks and bonds were the story of markets at the start of a busy week, with the dollar falling to a four-month low and gold topping $5,000 for the first time. US equities rose on gains in power suppliers as natural gas jumped above $6.

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.

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 after 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 jump 20%.

The S&P 500 rose 0.6%. The yield on 10-year Treasuries slid two basis points to 4.21%. The dollar fell 0.5%. The yen jumped 1.1%.

“The dramatic recovery in the yen suggests that actual intervention is not needed,” said Marc Chandler at Bannockburn Capital Markets. “The stepping up verbal intervention did the trick.”

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 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.

Equities bounced, following the first back-to-back weekly losses for the S&P 500 since June.

“Stress‑driven selloffs are becoming increasingly short‑lived, and this episode was not corroborated by other technical indicators, such as credit spreads, the put/call ratio, or broader measures of financial conditions,” said Mark Hackett at Nationwide.

The pattern is reminiscent of the market’s trajectory since 2020, characterized by emotion‑driven pullbacks that are quickly met with buying pressure, as the buy‑the‑dip instinct continues to assert itself. Following the strong run to record highs, a period of consolidation is neither unusual nor unhealthy.

The “Magnificent Seven” have 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 mega-cap 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 US 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 to Powell 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.

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.

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. 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. Goldman Sachs Group Inc. is making a return to the US dollar bond market just over a week since its $16 billion bond sale — the biggest on record for a Wall Street bank. 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. 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. 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. Some of the main moves in markets:

Stocks

The S&P 500 rose 0.6% as of 1 p.m. New York time The Nasdaq 100 rose 0.6% The Dow Jones Industrial Average rose 0.5% The MSCI World Index rose 0.7% Bloomberg Magnificent 7 Total Return Index rose 0.8% The Russell 2000 Index fell 0.2% Currencies

The Bloomberg Dollar Spot Index fell 0.5% The euro rose 0.4% to $1.1879 The British pound rose 0.4% to $1.3691 The Japanese yen rose 1.1% to 153.97 per dollar Cryptocurrencies

Bitcoin rose 1.3% to $87,600.51 Ether rose 3.2% to $2,906.66 Bonds

The yield on 10-year Treasuries declined two basis points to 4.21% Germany’s 10-year yield declined four basis points to 2.87% Britain’s 10-year yield declined one basis point to 4.50% The yield on 2-year Treasuries was little changed at 3.59% The yield on 30-year Treasuries declined three basis points to 4.80% Commodities

West Texas Intermediate crude fell 0.2% to $60.94 a barrel Spot gold rose 2.3% to $5,101.60 an ounce ©2026 Bloomberg L.P.