Weekly Market Recap: Mega-cap Rebound & Macro Resilience
Stocks advanced in the holiday-shortened week, supported by a technical rebound in mega-cap technology and communication services names. The most constructive development was the improvement in technical momentum.
The S&P 500’s move back above its 50-day moving average and the Nasdaq’s snap of a multi-week losing streak suggest stabilization following January’s volatility. Sector leadership tilted back toward growth and cyclicals, while prior defensive leaders cooled.
Participation broadened beyond large-cap growth with mid- and small-cap posting solid gains, reinforcing the rotation theme that has characterized the start of the year. Cyclical sectors such as industrials, financials, and energy led the advance, while defensive groups like consumer staples and health care lagged after prior outperformance. Software remained a relative weak spot, even as semiconductors and select mega-caps stabilized.
At the same time, inflation crosscurrents, tariff uncertainty, and geopolitical risks remain unresolved. The market has shown resilience with sector rotation and absorbing headline shocks, but still quick to r-price expectations. With NVIDIA earnings ahead and inflation still elevated, leadership trends and breadth will remain key indicators of whether this rebound evolves into a more durable advance.
The Economy
Economic data reflected a mixed macro backdrop. Advance Q4 GDP came in at 1.4%, well below expectations and sharply slower than the prior quarter’s 4.4% pace. At the same time, the Q4 Chain Deflator registered 3.6%, underscoring that inflation pressures remain elevated despite moderating growth – a mild stagflationary mix.
December personal income rose 0.3%, while spending increased 0.4%, indicating continued consumer resilience. However, the PCE Price Index – the Fed’s preferred inflation gauge – rose 0.4% (core also 0.4%), keeping the year-over-year rate near 3.0%.
Manufacturing and services PMIs remained in expansion territory, and industrial production surprised to the upside, but housing data continued to reflect affordability constraints. Overall, growth is moderating, yet inflation remains sticky enough to complicate the policy outlook.
The Federal Reserve
The January FOMC minutes carried a modestly hawkish tone, with several participants acknowledging that rate hikes could be reconsidered if inflation remains above target. While that commentary prompted some brief volatility midweek, rate-cut expectations for later in the year remained largely intact.
Treasury yields drifted modestly higher on the week, with the 2-year yield rising to 3.48% and the 10-year to 4.09%. The market continues to grapple with a Fed caught between slowing growth and stubborn inflation – a dynamic that limits near-term easing flexibility. The Fed remains patient and data-dependent, with inflation progress still insufficient to justify imminent cuts.
Geopolitics & Global Backdrop
Geopolitical tensions remained elevated, particularly surrounding the U.S. and Iran. Reports midweek that both sides were preparing for potential military conflict sent crude oil sharply higher, lifting the energy sector. Later in the week, headlines suggested President Trump appeared ready to order an attack on Iran, further supporting oil prices and defensive names.
Trade policy added another layer of volatility. The Supreme Court ruled against sweeping IEEPA tariffs, which initially boosted trade-sensitive sectors. However, President Trump quickly signaled plans to impose a 15% global tariff under Section 122 authority, reintroducing uncertainty and creating choppy intraday swings. While markets ultimately absorbed the policy uncertainty constructively, geopolitical and trade risks remain active sources of headline-driven volatility.
Fourth Quarter Earnings
Earnings and corporate developments drove substantial stock-level dispersion. Mega-cap names such as Apple, NVIDIA, Amazon, Alphabet, and Meta regained footing, helping lift the broader indices. Semiconductor stocks showed relative strength, while software remained uneven as investors continued to digest AI disruption fears.
Outside of tech, industrial and financial names contributed meaningfully. Deere posted a strong earnings beat, Global Payments surged on results, and activist involvement boosted Norwegian Cruise Line and Fiserv.
Retail and consumer names were mixed, with Walmart’s cautious guidance weighing on staples while discretionary names rebounded on tariff headlines.
The week reinforced that earnings quality, guidance clarity, and sector positioning continue to drive differentiation in an otherwise rotational backdrop.
Week Ahead
This week, earnings will be a primary market driver as major names continue to report, including Home Depot and TJX Companies.
Most attention will be paid to NVIDIA’s release on Wednesday as investors look for continued growth following evidence of elevated capital spending from the other mega-caps. Salesforce will also garner attention on Thursday as investors look to see how the software bellwether performs following extreme negative sentiment.
As always, please reach out to us for any questions and thank you for your trust.
Respectfully,
Michael Neill, CFA