Stocks Decline Due to Sluggish Performance in Software and Credit Card Sectors

Market Recap: Major Indexes End Lower

On Tuesday, the S&P 500 Index ($SPX) and Nasdaq 100 Index ($IUXX) both slipped by 0.19% and 0.18% respectively, while the Dow Jones Industrial Average ($DOWI) dropped 0.80%. Futures for March E-mini S&P and Nasdaq also closed in the red, down 0.22% and 0.18%.

Key Drivers Behind Tuesday’s Decline

Early gains in the stock market faded as software shares came under pressure following Anthropic’s unveiling of a new AI tool aimed at a wider array of workplace tasks. Additionally, credit card issuers continued to decline for a second consecutive session after President Trump warned that lenders could face legal consequences if they fail to cap interest rates at 10% for a year.

Market Movers and Economic Highlights

Stocks briefly moved higher as inflation worries eased following a smaller-than-anticipated increase in the US core consumer price index for December. Energy stocks also advanced, buoyed by a more than 2% jump in WTI crude oil prices, reaching their highest level in over two months. The rise in oil was fueled by escalating geopolitical tensions, including new US tariffs on countries trading with Iran and disruptions at Russia’s Black Sea oil terminal due to drone attacks, which cut crude shipments nearly in half.

Lingering concerns about the Federal Reserve’s autonomy weighed on the market, after Fed Chair Powell revealed that the Justice Department was considering criminal charges related to his June testimony about Fed building renovations, allegedly in response to the Fed’s resistance to President Trump’s push for lower interest rates.

Recent Economic Data

• December’s US Consumer Price Index (CPI) remained steady at 2.7% year-over-year, matching forecasts. The core CPI also held at 2.6% year-over-year, slightly below expectations.
• New home sales in October dipped 0.1% to 737,000, surpassing the anticipated 715,000.
• St. Louis Fed President Alberto Musalem described the US economy as resilient, expecting above-trend growth and advising against a more accommodative Fed policy.

Looking Ahead: Economic Events This Week

• Wednesday: November’s Producer Price Index (PPI) is projected to rise 2.7% year-over-year, with core PPI expected to match that pace. Retail sales for November are forecast to increase by 0.5% overall and 0.4% excluding autos. Existing home sales for December are anticipated to climb 2.2% to 4.22 million units. The Supreme Court may also issue a decision on President Trump’s tariffs.
• Thursday: Initial jobless claims are expected to rise by 7,000 to 215,000. The Empire State Manufacturing Survey is forecast to improve by 4.9 points to 1.0.
• Friday: December manufacturing output is expected to slip by 0.1%. The NAHB Housing Market Index for January is predicted to rise by 1 point to 40.

The fourth-quarter earnings season kicks off this week, with banks leading the way. Bloomberg Intelligence anticipates S&P 500 earnings to grow by 8.4% in Q4, or 4.6% excluding the largest tech companies.

Markets are currently pricing in just a 3% chance of a 25 basis point rate cut at the FOMC’s next meeting on January 27-28.

Global Markets

• Euro Stoxx 50 reached a new record, ending up 0.22%.
• China’s Shanghai Composite retreated 0.64% from a decade high.
• Japan’s Nikkei 225 soared 3.10% to a fresh all-time high.

Interest Rate Developments

• March 10-year Treasury note futures closed up, with the yield slipping to 4.167%. The rally was supported by softer-than-expected core CPI data and strong demand at the Treasury’s $22 billion 20-year bond auction.
• Earlier in the session, Treasuries faced pressure due to ongoing concerns about Fed independence and hawkish remarks from St. Louis Fed President Musalem, who argued against easing policy.
• European bond yields climbed, with Germany’s 10-year bund yield up to 2.847% and the UK’s 10-year gilt yield rising to 4.398%.
• Swaps indicate just a 1% probability of a 25 basis point rate hike by the ECB at its February 5 meeting.

Notable US Stock Movers

• Software stocks fell after Anthropic’s AI announcement. Salesforce (CRM) led declines in the S&P 500 and Dow, dropping over 7%. Adobe (ADBE) and Intuit (INTU) lost more than 5% and 4% respectively. Workday (WDAY), ServiceNow (NOW), Autodesk (ADSK), and Microsoft (MSFT) also ended lower.
• Credit card issuers continued to slide after President Trump’s comments. Visa (V) dropped over 4%, while Mastercard (MA) and JPMorgan Chase (JPM) each fell more than 3%.
• Travere Therapeutics (TVTX) tumbled over 14% after the FDA requested more information about its kidney disease treatment, potentially delaying approval.
• Super Micro Computer (SMCI) declined more than 4% following a sell rating and a $26 price target from Goldman Sachs.
• CRH Plc (CRH) slipped over 3% after a downgrade by Wells Fargo Securities.
• Synopsys (SNPS) dropped more than 3% after Piper Sandler lowered its rating to neutral and set a $520 price target.
• Chipotle Mexican Grill (CMG) lost over 2% after announcing the departure of its chief brand officer.
• Delta Air Lines (DAL) fell more than 2% after issuing full-year earnings guidance below analyst expectations.
• Moderna (MRNA) surged over 17%, leading vaccine makers higher, as several medical groups plan to challenge recent changes to the childhood vaccination schedule.
• Option Care Health (OPCH) jumped more than 8% after TD Cowen highlighted the company’s strong 2026 EBITDA growth forecast.
• Intel (INTC) climbed over 7% after KeyBanc Capital Markets upgraded the stock to overweight with a $60 price target.
• Advanced Micro Devices (AMD) advanced more than 6% following a similar upgrade and a $270 price target from KeyBanc.
• Revvity (RVTY) rose over 6% after reporting preliminary Q4 revenue above expectations.
• Albemarle Corp (ALB) gained more than 4% after Deutsche Bank upgraded the stock to buy with a $185 price target.
• Cardinal Health (CAH) was up 3% after raising its full-year earnings outlook above consensus estimates.
• Huntington Ingalls Industries (HII) advanced over 3% after Bernstein increased its price target to $412.
• Alphabet (GOOGL) rose more than 1% after Google signed a multi-year agreement to provide AI technology for Apple.

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