Earnings season kicked off, providing batches of company reports for investors to digest. Several big banks reported, with Wells Fargo, Citigroup and Bank of America selling off, while Morgan Stanley and Goldman Sachs gained after their earnings topped estimates. The S&P 500 financial sector saw its largest weekly percentage drop since October, as worries around the proposed 10% cap on credit card interest rates weighed. Semiconductors got a boost following TSMC’s record quarter as well as news that the White House would exempt imported chips used to build out US supply chains from fresh 25% tariffs.
While the S&P 500 and Dow Jones Industrial Average both ended Monday at a record high, subsequent losses saw them log weekly declines of 0.4% and 0.3% respectively. Meanwhile the tech-heavy Nasdaq Composite dropped by 0.7%. In contrast, the small-cap Russell 2000 ended the week at a record high, advancing 2%. So far this year, the index has outperformed large-cap peers, buoyed by growing optimism around the economy and strong corporate earnings. US Treasury yields also saw mixed performance. Yields fell slightly after core consumer prices rose lower-than-expected in December, while they picked up on Friday. This came after comments from President Trump indicated that he may keep Kevin Hassett in his current role, dampening expectations for him to become the next Federal Reserve chair.
European markets logged another positive week, supported by earnings reports and economic data. Overall, the pan-European STOXX 600 was up 0.8%, ending at a record high. This was its fifth consecutive weekly gain, its best run since May 2025. Simmering geopolitical tensions in Venezuela and Iran continued to be a boost to defence stocks, although on Wednesday they snapped an eight-session winning streak. Technology stocks also benefited from TSMC’s earnings, with ASML rising to a record and reaching the $500bn market value mark. Luxury stocks were a laggard, selling off on Friday, with Richemont’s upbeat earnings overshadowed by profit-taking and news of a rating downgrade from BofA.
Japanese equities experienced a strong week. The Nikkei 225 added 3.8% and the broader Topix index climbed 4.1%, both scaling new peaks. The market was supported by growing expectations that a snap general election could be called as soon as February, as the ruling Liberal Democratic Party looks to secure a majority. The news sent the yen sharply lower against the US dollar, although it later steadied, helped by the finance minister reasserting that the government could take decisive action against sharp currency moves. Over in Hong Kong, the Hang Seng index added 2.3%, however on the mainland the Shanghai Composite was one of the few decliners of the week, down 0.5%. There was weakness after authorities tightened rules on margin financing.