Global Markets React to Local Earnings as Attention Shifts Away from Central Banks

Alexander Garcia
30 Jan, 2025
Miami

Wall Street indexes traded around the flatline, and investors reviewed the latest batch of earnings. 

Investors turned cautious a day after the Federal Reserve poured cold water over imminent rate-cut expectations, citing elevated inflation.

The S&P 500 index increased 0.2%, and the Nasdaq Composite declined 0.2%, and investors reviewed a slew of corporate results, including updates from Microsoft, Meta, Tesla, and IBM.

Investor sentiment has been on the defensive after the emergence of a cheaper chatbot from a Chinese startup raised worries about the need for expensive computer servers using advanced chips made by American companies.

Moreover, market sentiment wavered after the GDP growth in the fourth quarter slowed to an annual pace of 2.3%, the U.S. Bureau of Economic Analysis reported Thursday in its flash estimate.

The U.S. economy expanded at the slowest pace in three quarters and slowed from 3.1% in the third quarter, according to the preliminary estimate released by the government agency.

The Federal Reserve left the fed funds rate range unrevised between 4.25% and 4.50% and halted its rate-cutting cycle after trimming in the previous three meetings. 

Policymakers are likely to hold rates steady at the end of the next meeting on March 19, until a solid evidence emerges of sustained decline in inflation. 

While the Fed's tough talk on inflation garners headlines, interest rates have been far from restrictive for more than a year, and inflation in the service sector and core inflation have been significantly higher than the target rate of 2% and showing no sign of easing for more than nine months.

 

U.S. Indexes and Treasury Yields

The S&P 500 index increased 0.2% to 6,050.44, the Nasdaq Composite edged down 0.1% to 19,609.31, and the Russell 2000 index traded up 1.2% to 2,310.52.

The yield on 2-year Treasury notes edged lower to 4.21%, 10-year Treasury notes dropped to 4.50%, and 30-year Treasury bonds eased to 4.74%.

WTI crude oil decreased $0.12 to $72.52 a barrel, and natural gas prices edged higher by $0.02 to $3.19 a thermal unit.

Gold rose by $21.62 to 2,781.76 an ounce, and silver edged up by $0.35 to $31.21.

The dollar index, which weighs the US currency against a basket of foreign currencies, dropped 0.03 to 107.98 and traded at a two-year high.

 

U.S. Stock Movers

Microsoft Corp dropped 4.6% to $421.85 despite the company posting strong results for its fiscal 2025 second quarter ending in December, helped by a 21% increase in cloud service sales.

However, the software company's revenue outlook in the current quarter disappointed some investors. 

Meta Platforms Inc surged 2.3% to $692 after the parent company of Facebook, Instagram, and WhatsApp posted strong earnings for the fourth quarter ending in December.

Tesla gained 3% to $400.86 after the electric vehicle maker posted mixed earnings in the fourth quarter ending in December.

IBM soared 9.4% to $250.29 after the legacy technology company reported fourth-quarter results that surpassed market expectations. 

The company said its software business expanded by double digits in the second half, and the generative artificial intelligence business order book increased by $2 billion to $5 billion. 

UPS plunged 14.2% to $114.72 after the parcel delivery company said it reached a deal with Amazon, its largest customer, to lower shipment volume by 50% by the second half of 2026. 

UPS was under pressure after the company reported better-than-expected earnings, but revenue fell short of market expectations in the fourth quarter. 

 

European Markets Extended Gains After ECB Cuts Rates

European stock market indexes extended the three-day rally, and investors welcomed rate decisions by the European Central Bank. 

Benchmark indexes in Frankfurt, Paris, Milan, and London advanced after the central bank delivered on the widely anticipated 25 basis point rate cut.

The European Central Bank lowered its deposit rate to 2.75%, its main refinancing rate to 2.9%, and its marginal lending rate to 3.15%, effective February 5. 

The central bank said inflationary pressures are still elevated, largely because of the delayed wage increases and price adjustments, but wage growth is moderating, and corporations are absorbing some of the higher costs of operations. 

The central bank signaled that additional rate cuts are likely if inflation continues to fall as estimated by policymakers. 

"The disinflation process is well on track. Inflation has continued to develop broadly in line with the staff projections and is set to return to the Governing Council’s 2% medium-term target in the course of this year," the ECB noted in a statement released after the meeting. 

Most measures of underlying inflation suggest that inflation will settle at around the target on a sustained basis, according to the governing council's estimate. 

 

Eurozone GDP Growth Unexpectedly Stalled In Fourth Quarter

The Euro Area's GDP in the fourth quarter unexpectedly stalled from the previous quarter, Eurostat, the statistical agency of the region, reported Wednesday.

Economic activities rose at an annual pace of 0.9% in the fourth quarter, but the growth was overshadowed by the ongoing weakness in Germany and France.

For the full year 2024, GDP expanded at an annual pace of 0.7% in the euro area and 0.8% in the European Union. 

Separately, France's statistical agency, INSEE, reported economic growth unexpectedly contracted for the first time in nearly two years in the fourth quarter.

Gross domestic product shrank 0.1% sequentially after expanding at 0.3% in the third quarter.

Two separate reports supported the case for the European Central Bank to continue to lower key lending rates and soften the economic contraction.

 

Spain's Annual CPI Jumped to 7-Month High in January

Spain's annual inflation rate advanced for the fourth consecutive month and reached the highest in seven months, the National Statistics Institute reported Thursday.

The annual pace of inflation in January rose to 3.0% from 2.8% in December, largely driven by an increase in fuel prices.

However, the core rate of inflation, which excludes volatile food and energy prices, slowed to 2.4% from a four-month high of 2.6% in December.

From the previous month, the consumer price inflation increased by 0.2%, following a 0.5% rise in December. 

However, the EU-harmonized consumer inflation advanced at an annual pace of 2.9% year-on-year and decreased by 0.1% from the previous month.

 

Europe Indexes and Yields

The DAX index moved higher by 0.3% to 21,694.57; the CAC-40 index climbed 0.5% to 7,909.78; and the FTSE 100 index advanced by 0.2% to 8,574.94.

The yield on 10-year German bonds inched lower to 2.53%, French bonds declined to 3.27%, the UK gilts moved up to 4.60%, and Italian bonds edged lower to 3.62%.

The euro was flat at $1.04; the British pound was lower at $1.24; and the U.S. dollar was higher and traded at 90.75 Swiss cents.

Brent crude decreased $0.43 to $76.15 a barrel, and the Dutch TTF natural gas was higher by €0.17 to €49.91 per MWh.

 

Europe Stock Movers

Nokia gained 2.3% to €4.40 after the mobile technology company posted strong fourth-quarter results ending in December.

ABB Ltd. increased 1.3% to CHF 52.28 after the Swiss engineering company reported an increase in revenue, profit, and orders in the fourth quarter.

The company's board also proposed to increase an ordinary dividend to 0.90 Swiss franc compared to 0.84 Swiss franc in the previous year.

The company also proposed a new $1.5 billion stock repurchase plan, ending on January 28, 2026.

Deutsche Bank decreased 3.5% to €18.85, and Germany's largest bank announced a larger-than-expected provision decline in earnings in the fourth quarter and 2024 as a result of a higher provision for legal expenses and restructuring costs.

Electrolux AB dropped 6% to 103.45 krona after the Swedish home appliance maker swung to a profit in the fourth quarter, but the company signaled market uncertainty in North America.

The appliance maker skipped a dividend for the third year in a row.

H&M declined 5.1% to €12.81 after the Swedish apparel retailer reported weaker-than-expected sales in the fourth quarter.

 

Sensex Extends 3-Day Rally and Erases Weekly Losses

Stocks in Mumbai extended gains for the third session in a row, and benchmark indexes erased sharp losses of Monday. 

The S&P 500 and Nifty indexes advanced 0.4% as investors reviewed the latest batch of earnings and debated economic growth outlook ahead of the release of the Union Budget this weekend. 

Financial markets are looking forward to the government's plan to increase renewable electric power production, improve water distribution, modernize the railway network, and provide incentives to expand the manufacturing sector. 

The Reserve Bank of India is set to announce its rate decisions next week, and investors are anticipating the central bank to hold rates steady. 

The U.S. Federal Reserve left its key lending rate range unrevised, citing elevated inflation, after trimming rates in three previous meetings in a row. 

The Fed funds rate range was left unrevised between 4.25% and 4.50%, and it was confirmed that the policymakers are struggling to lower inflation to its long-term target rate of 2% despite eleven rate hikes over 2022 and 2023. 

European markets advanced following the latest batch of positive earnings, and investors held out for a rate cut of at least 25 basis points after the policy meeting next week. 

 

Stock Indexes and Bond Yields

The Sensex index increased by 0.4% to 76,855.46, and the Nifty index increased by 0.5% to 23,290.70.

On the Mumbai stock exchange, 44 stocks traded at their 52-week highs, and 56 stocks traded at their 52-week lows.

The yield on the 10-year Indian government bonds inched lower to 6.7%, and the Indian rupee hovered near a record and traded at 86.57 against the U.S. dollar.

The gold price increased by 0.3% to ₹81,128 per ten grams, and silver edged up by 0.6% to ₹92,400 per kilo.

Crude oil rose by 0.1% to ₹6,297 per barrel, and natural gas rose by 0.2% to ₹274.1 per thermal unit.

 

Stock Movers

Blue Dart Express Ltd. increased 0.4% to ₹6431.65, and the company reported an 8% increase in revenue and a 9% decline in profit in the December quarter.

Tata Motors Ltd. dropped 8.1% to ₹691.80, and the company reported an increase in revenue and a 22% decline in profit in the December quarter.

Maruti Suzuki India Ltd. increased 3% to ₹12,011.50 after the company reporting an increase in revenue and earnings. 

Ambuja Cements Ltd. decreased 4% to ₹522.20 after the company reported a 24% increase in net income but margins fell sharply in the December quarter. 

Indian Bank increased 6% to ₹544.70, and the company reported a marginal increase in earnings in the fiscal third quarter.

Adani Power Ltd. decreased 0.4% to ₹520.50 after the company reporting an increase in revenue and earnings in the fiscal third quarter. 

Voltas Ltd. dropped 11.2% to ₹1,449.95 despite the company swinging to a profit from a year ago in the December quarter.

Bajaj Finance Limited increased 4.5% to ₹8110.15, and the company reported revenue in the December quarter rose 28% from a year ago.