Stocks Climb on Solid Data as Global Tensions Cool: Markets Wrap
(Bloomberg) — The cooling of geopolitical tensions, a rally in big tech and solid economic data fueled gains in stocks, with the market remaining higher after an in-line inflation report. Short-dated bonds fell.
Equities rose around the world, with the S&P 500 up almost 1%. Tech megacaps rallied as comments by Nvidia Corp.’s chief Jensen Huang bolstered the artificial-intelligence trade. Small caps beat the US equity benchmark for a 14th straight session. JPMorgan Chase & Co. pared gains as President Donald Trump sued the lender and its head Jamie Dimon over alleged debanking.
Treasury two-year yields headed toward their highest since early December as strong economic data reinforced the argument for the Federal Reserve to keep rates on hold.
The US economy expanded in the third quarter by slightly more than initially reported, supported by stronger exports and smaller drag from inventories. Initial jobless claims steadied at 200,000 last week. And personal spending rose at a solid pace in November, underscoring consumer resilience.
“US consumers continue to underpin the economy,” said Lale Akoner at eToro. “Resilient spending lowers near-term recession risk and supports corporate revenues, particularly in consumer-facing sectors. However, steady demand also means interest rates are likely to stay higher for longer.”
Meantime, European Union lawmakers are expected to vote on ratifying the bloc’s trade deal with the US, restarting the process after Trump walked back his latest threat to impose tariffs on European allies that opposed his plans to annex Greenland. The island’s prime minister says he’s willing to go further in increasing defense, including agreeing on a permanent NATO mission.
“This episode once again highlights how headline-driven the market remains, and how quickly sentiment can flip when geopolitical risk is dialed back,” said Fawad Razaqzada at Forex.com.
The S&P 500 rose 0.8%. A gauge of the “Magnificent Seven” shares climbed 2.3%. The Russell 2000 index of small firms hit a fresh record. A key measure of stock volatility — the VIX — tumbled to around 15.
The yield on 10-year Treasuries was little changed at 4.25%. The dollar lost 0.3%. Oil sank as Ukrainian President Volodymyr Zelenskiy discussed plans for trilateral meetings with the US and Russia. Gold rose to all-time highs.
The latest data should reassure the Fed that the economy remains on a solid footing, despite a cooler labor market, said James McCann at Edward Jones.
“There looks to be little urgency to cut rates at next week’s meeting, and the central bank could stay on hold for longer should growth remain robust into 2026 and inflation continue to run at above target rates,” he added.
Inflation-adjusted gross domestic product increased at a revised 4.4% annualized rate, the fastest in two years. The Fed’s preferred measure of underlying inflation rose 0.2% in November from the prior month and 2.8% from a year earlier. The core personal consumption expenditure’s price index picked up slightly from October on an annual basis.
“This is likely going to keep the Fed on pause for a few a months, at least until we get a new Fed Chair who will likely push for renewed cuts,” said Sonu Varghese at Carson Group.
This set of new data reinforces the view that the US is experiencing stronger — not hotter — growth, according to Marco Casiraghi at Evercore.
“If macro conditions continue to evolve in this favorable manner, we think the Fed will keep rates on hold before delivering a cut in June – when the new Fed chair will take over,” and then cut two more times in the second half of 2026, he said.
Recent data support the Fed adopting a cautious approach to policy changes in the near term, according to Oscar Munoz and Gennadiy Goldberg at TD Securities.
“There is now a higher burden on the data to justify further easing,” they said.
The TD strategists expect policymakers to keep rates on hold at 3.50%-3.75%. While Fed Chair Jerome Powell is likely to sound noncommittal around near-term rate cuts, they expect him to remind markets that the median Fed official still looks for easing this year.
“Fundamentals are good and the Fed is likely to cut two or three times this year,” said Scott Helfstein at Global X. “That continues to set up a favorable backdrop even if the calm is occasionally disrupted by geopolitical volatility.”
Speculation that Europe could leverage US assets to retaliate against Trump’s bid for Greenland has been the chatter on trading floors and at the Davos gathering this week. Greenland’s pension fund is mulling whether it should continue investing in US stocks, in what its chief executive says would be a symbolic stand against the push to seize control of the island.
Trump vowed “big retaliation” if European countries sell US assets in response to his tariff threats related to Greenland, adding pressure on them to stick with an emerging deal over the future of the island.
“If they do, they do. But you know, if that would happen, there would be a big retaliation on our part,” Trump said during a Fox Business interview at the World Economic Forum in Davos. “And we have all the cards.”
Meantime, the dollar retained its supremacy in global trade despite the persistent uncertainty associated with Trump’s policies.
The greenback’s portion of international transactions rose to 50.5% in December, up from 46.8% a month earlier, according to the latest data compiled by global financial messaging service Swift, or the Society for Worldwide Interbank Financial Telecommunication. That’s the highest share since 2023 when the Belgium-headquartered consortium revised how it collects the transaction data.
There’s little sign of foreign investors shunning US equities and bonds amid tensions surrounding the Trump administration’s stance toward Greenland, according to JPMorgan strategists including Nikolaos Panigirtzoglou.
“Greenland is likely to stay in the headlines in the near term, and markets remain susceptible to fresh political or geopolitical developments,” said Ulrike Hoffmann-Burchardi at UBS Global Wealth Management. “But the latest stock rebound serves as a reminder that favorable fundamentals remain in the driver’s seat.”
She maintains the view that staying invested via a diversified portfolio remains the most effective way to manage market uncertainty.
Geopolitics only truly affect stock prices when they have direct effects on the factors that truly influence equity valuations, according to Steve Sosnick at Interactive Brokers.
“Unless one can draw a straight line between the global event and the revenues, earnings, or cash flows of a particular company or sector – the items that directly affect the value of a company – then geopolitics can be considered ‘background noise’ from a market viewpoint, no matter how newsworthy the events,” he said.
Companies from around the world remain focused on American markets, driven by the money they’re getting out of the US, Nasdaq Inc. Chief Executive Officer Adena Friedman said.
“The investment firms are obligated to find the best returns,” Friedman told Bloomberg Television in Davos. There’s been a $3 trillion increase in equity flows into the US from foreign investors in the past year, she said. “We just have to continue to drive those outsize returns within our economy to continue the flows coming in.”
BlackRock Inc. Chief Executive Officer Larry Fink said there is no bubble in artificial intelligence, emphasizing the volume of investment needed to develop the technology.
“I don’t think there is any uncertainty about AI,” Fink said in a Bloomberg Television interview on the sidelines of the World Economic Forum. “I sincerely believe there is no bubble in the AI space.”
With small-caps are outperforming large-caps yet again, there is a clear shift in leadership underway, noted Jonathan Krinsky at BTIG.
“While there will be pullbacks, we want to stick on the side of this new trend which is still in its early days, in our view,” he said.
Retail investors shelled out an “impressive” $12.9 billion on equities this week, according to JPMorgan strategist Arun Jain. On Tuesday, retail investors had responded to geopolitical developments by purchasing stocks, marking the third-largest single-day buying event in a year, he noted.
Meantime, trend-following funds are starting 2026 with fresh momentum, outperforming stocks and bonds after a year of false starts.
A Societe Generale index tracking major trend-following funds has climbed almost 4% in the opening weeks of the year, the second-strongest start on record in data going back to 2000. The performance follows a rally in metals, a weakening yen and resilient global equities, just the kind of sustained price moves these strategies need to deliver returns.
Despite the fact that growth stocks are negative year-to-date, momentum names are doing well, noted Louis Navellier at Navellier & Associates.
“The broadening of returns is a positive development, and the strength of smaller companies is a major vote of confidence in broad economic growth and reflects the expectation of lower interest rates, which is more meaningful for smaller companies,” he concluded.
Corporate Highlights:
Tesla Inc. will probably sell its Optimus robots to the public by the end of next year, according to Chief Executive Officer Elon Musk, who’s said the carmaker’s fortunes will be increasingly dependent on humanoid machines. SpaceX has lined up four banks to lead its initial public offering, according to people familiar with the matter, as Musk’s rocket and satellite firm moves forward with plans for the biggest-ever listing. Apple Inc. has expanded the job of hardware chief John Ternus to include design work, solidifying his status as a leading contender to eventually succeed Chief Executive Officer Tim Cook. Alphabet Inc.’s Google is rolling out a new option to personalize search results by tapping user data from the tech giant’s other applications, its latest bid to keep ahead of competition from the likes of OpenAI. Alibaba Group Holding Ltd. is preparing to list its chipmaking arm, tapping strong investor interest in the small circle of companies aspiring to compete with Nvidia Corp. in the hot AI accelerator business. Netflix Inc. co-Chief Executive Officer Ted Sarandos is planning to testify in February at a US Senate committee hearing looking into his company’s proposed $82.7 billion purchase of the streaming and studio operations of Warner Bros. Discovery Inc. Paramount Skydance Corp. again extended its tender offer for Warner Bros. Discovery Inc. shares and said it would ask investors to vote against a proposed sale to Netflix Inc. at a special meeting of Warner Bros. shareholders. Bank of America Corp. and Citigroup Inc. are exploring options they could offer up as an olive branch to satisfy President Trump’s demand to cap credit card interest rates at 10% for one year. US airlines are already announcing backup plans for passengers ahead of an expected winter storm this weekend that could be the biggest of the season and cause massive disruptions to air traffic nationwide. General Motors Co. plans to move production of its next-generation Buick Envision compact SUV, which is currently built in China, to a plant in Kansas in 2028, a sign of the pressure automakers are under to reshore output of vehicles sold in the US. Procter & Gamble Co.’s executives signaled sales are rebounding in the US and expressed confidence the company will meet its full-year guidance. General Electric Co.’s full-year outlook underwhelmed investors, a sign of high expectations on the jet-engine maker after a steep rise in the stock last year. Abbott Laboratories forecast a first-quarter profit that was lower than Wall Street expected and missed fourth-quarter sales estimates after its nutrition unit fell short of expectations, sending shares lower. Moderna Inc.’s chief executive officer said the company doesn’t plan to invest in new late-stage vaccine trials because of growing opposition to immunizations from US officials. Waymo will start offering its robotaxi service in Miami to the public Thursday, the first of around a dozen cities where the Alphabet Inc. company plans to launch this year. Freeport-McMoRan Inc. is making progress on a restart of its sprawling Indonesian copper mine, it said Thursday, after a deadly mudslide shuttered the operation that’s critical to global supply. Target Corp. is adding two retail veterans to its board as the beleaguered retailer seeks to reverse a sales slump under incoming Chief Executive Officer Michael Fiddelke. Lululemon Athletica Inc.’s “Get Low” leggings, derided for being see-through, are available for sale again online. Shoppers just have to make sure to read the disclaimers first. PayPal Holdings Inc. agreed to acquire Cymbio, a platform designed to help merchants sell products across AI chatbots. Terms weren’t disclosed. General Fusion Inc. has agreed to a merger with a blank-check company in a deal that’s expected to create one of the first publicly traded nuclear fusion technology developers. Some of the main moves in markets:
Stocks
The S&P 500 rose 0.8% as of 2:36 p.m. New York time The Nasdaq 100 rose 1% The Dow Jones Industrial Average rose 0.9% The MSCI World Index rose 0.9% Bloomberg Magnificent 7 Total Return Index rose 2.3% Philadelphia Stock Exchange Semiconductor Index rose 0.4% The Russell 2000 Index rose 1% KBW Bank Index rose 0.9% Currencies
The Bloomberg Dollar Spot Index fell 0.3% The euro rose 0.5% to $1.1743 The British pound rose 0.4% to $1.3489 The Japanese yen was little changed at 158.43 per dollar Cryptocurrencies
Bitcoin fell 0.9% to $89,413.96 Ether fell 2.8% to $2,944.25 Bonds
The yield on 10-year Treasuries was little changed at 4.25% Germany’s 10-year yield was little changed at 2.89% Britain’s 10-year yield advanced two basis points to 4.47% The yield on 2-year Treasuries advanced three basis points to 3.61% The yield on 30-year Treasuries declined two basis points to 4.85% Commodities
West Texas Intermediate crude fell 2.1% to $59.36 a barrel Spot gold rose 1.7% to $4,912.33 an ounce ©2026 Bloomberg L.P.
