US stock close higher ahead of earnings, Fed meeting

The S&P 500 and the Nasdaq advanced for a fourth consecutive session on Jan 26, as investors geared up for a slew of mega-cap earnings and a Federal Reserve update on interest rate policy later this week.

Both indexes hit their highest levels in more than a week and registered their longest string of advances since December.

Gains in a handful of mega-cap names did most of the heavy lifting for the S&P 500, with Apple, Microsoft, Alphabet, Broadcom and Meta among the benchmark’s top boosts.

Apple, Meta, Microsoft and Tesla are slated to report quarterly results later this week, setting up a key test for a rally powered by euphoria around AI.

Investors will look for signs of measurable payoffs from AI spending. With concerns over high valuations in the tech space, guidance will be especially important and even a modest stumble could spark a rethink about the AI trade.

“You’re seeing communications and technology are trading well today in advance of the earnings from a lot of the large companies,” said Mr Chris Zaccarelli, chief investment officer of Northlight Asset Management in Charlotte, North Carolina.

“It seems like we’re having an expansion in corporate profits and an expansion in the economy, so generally speaking, investors are cautiously optimistic and most likely looking forward to earnings season.”

Of the 64 companies in the S&P 500 that had reported earnings as at Jan 23, 79.7 per cent beat analyst expectations as per data compiled by LSEG.

The Dow Jones Industrial Average rose 313.69 points, or 0.64 per cent, to 49,412.40, the S&P 500 gained 34.62 points, or 0.5 per cent, to 6,950.23 and the Nasdaq Composite gained 100.11 points, or 0.43 per cent, to 23,601.36.

Communications services finished up 1.3 per cent and was the biggest gainer among the S&P 500‘s 11 major industry sectors, while consumer discretionary was the biggest laggard with a 0.7 per cent decline.

The S&P 500‘s biggest drag was Tesla, which ended down 3 per cent. The S&P 500 materials sector rose 0.3 per cent as gold prices vaulted above US$5,000 an ounce for the first time, boosting names such as Newmont Corp, which finished up 1.3 per cent.

Also on investors’ minds was the Fed meeting, which starts on Jan 27 and ends with a policy update on Jan 28 afternoon. Traders see a roughly 97 per cent probability that the central bank will hold rates steady, according to CME Group’s FedWatch, but investors will hope for clues on its future rate path.

The decision risks being overshadowed by fresh questions over the central bank’s independence after the Justice Department opened a probe into chair Jerome Powell in January, and President Donald Trump said a pick for the next Fed chair could come soon.

In individual stocks, shares of Intel sank 5.7 per cent after falling 17 per cent on Jan 23 for their steepest drop in nearly 18 months after the chipmaker forecast quarterly profit and revenue below estimates.

Meanwhile, JetBlue dropped 3.8 per cent as the airline sector dealt with the aftermath of mass disruptions in flight schedules after a massive winter storm hit the United States.

Shares of prison operators GEO Group and CoreCivic, which have contracts with US Immigration and Customs Enforcement, fell sharply as US Senate Democrats said they will

oppose a funding Bill for the Department of Homeland Security

, which oversees ICE.

The fatal shooting of 37-year-old nurse Alex Pretti in Minneapolis on Jan 24 has escalated a public backlash against Mr Trump’s approach to immigration.

GEO shares fell 9.3 per cent for their biggest daily loss since August and CoreCivic fell 7 per cent, its biggest drop since November. Shares of USA Rare Earth rallied 7.9 per cent after reports that the US administration was taking a 10 per cent stake in the miner as part of a US$1.6 billion (S$2 billion) debt-and-equity investment package.

Elsewhere, CoreWeave climbed 5.7 per cent after Nvidia said it would invest US$2 billion in the cloud infrastructure firm.

Advancing issues outnumbered decliners by a 1.37-to-1 ratio on the NYSE, where there were 631 new highs and 63 new lows. On the Nasdaq, 2,360 stocks rose and 2,465 fell as declining issues outnumbered advancers by a 1.04-to-1 ratio.

On US exchanges, 18.41 billion shares changed hands on Jan 26 compared with the 17.60 billion 20-day average. REUTERS