Semiconductor Stocks Lead Stock Market Rally as Trump Signals Greenland Pivot

Major U.S. equity benchmarks extended their upward momentum today, building on yesterday’s gains as geopolitical tensions eased. The stock market rally was propelled by a combination of policy reassurance and solid economic fundamentals, with chip makers and AI-infrastructure companies spearheading the advance across multiple indexes. The S&P 500 advanced 0.78%, the Dow Jones Industrials climbed 0.96%, and the Nasdaq 100 gained 0.83% during today’s trading session. March futures contracts also reflected the positive sentiment, with E-mini S&P 500 futures up 0.70% and E-mini Nasdaq futures rising 0.92%.

The catalyst for today’s stock market rally centered on President Trump’s strategic shift regarding Greenland, with NATO Secretary General Mark Rutte providing clarification that any breakthrough was achieved without threatening the territory’s sovereignty. Instead, discussions focused on Arctic security concerns—a more measured approach that relieved market participants of previous escalation fears. This policy recalibration appeared to inject confidence into investor positioning ahead of the busy earnings season.

Economic Data Strengthens the Foundation for Today’s Rally

Fresh economic reports bolstered the stock market rally narrative by suggesting underlying resilience in the U.S. economy. Initial weekly jobless claims rose modestly by just 1,000 to 200,000, beating the consensus forecast of 209,000. More impressive was the upward revision of third-quarter GDP growth to 4.4% on an annualized quarterly basis, surpassing expectations that had anticipated no change at 4.3%. These stronger-than-expected figures reinforced the case for continued economic momentum, offsetting concerns about potential Federal Reserve rate decisions.

The markets are currently pricing in only a 5% probability of a 25 basis point rate cut at the Fed’s next policy meeting scheduled for January 27-28, reflecting confidence in economic strength. This expectation provides a tailwind for equity valuations, as investors have less anxiety about aggressive monetary accommodation being necessary in the near term.

Chip Leaders and AI Infrastructure Stocks Drive the Stock Market Rally

The breadth of today’s stock market rally was particularly notable in the semiconductor and artificial intelligence infrastructure sectors. ARM Holdings led Nasdaq 100 gainers with a surge exceeding 5%, while Microchip Technology advanced more than 3%. Following close behind were Marvell Technology, Analog Devices, ASML Holding, and Texas Instruments, each posting gains surpassing 2%. Additional strength appeared in Broadcom and Qualcomm, with both advancing more than 1%.

The Magnificent Seven mega-cap technology cohort also participated in the rally, though with varying degrees of enthusiasm. Meta Platforms soared more than 3%, while Alphabet and Tesla each gained more than 1%. Among the remaining members of this elite group, Nvidia climbed 0.91%, Apple advanced 0.56%, Microsoft gained 0.50%, and Amazon.com rose 0.20%. This broad-based technology participation underscored how the stock market rally was not confined to a narrow set of issues.

Energy Market Volatility Adds Complexity to the Stock Market Rally

Natural gas prices continued their extraordinary upward trajectory, extending this week’s sharp rally with gains exceeding 8% as prices reached their highest level in three years. The week-to-date surge has now accumulated to more than 60%, driven by an Arctic cold front expected to bring severe temperatures across much of the eastern United States. This weather pattern is boosting heating demand and creating risk of well freeze-offs that could disrupt domestic natural gas production. Energy stocks, particularly natural gas producers, benefited from this surge in commodity prices, adding another dimension to the broader stock market rally.

Earnings Season Contributes Positive Momentum

The initiation of the Q4 earnings season has provided constructive momentum to the stock market rally. Among the 38 S&P 500 companies that have reported results thus far, 81% have surpassed consensus earnings expectations—a strong beat rate that supports continued confidence in corporate profitability. Looking ahead, Bloomberg Intelligence projects that S&P 500 earnings will expand by 8.4% in the fourth quarter. Notably, even when excluding the Magnificent Seven technology megacaps, earnings growth is expected to reach 4.6%, indicating that profit expansion is not solely concentrated in the largest names.

Today’s individual stock results provided both winners and losers. Northern Trust jumped more than 7% after reporting fourth-quarter net interest income of $654.3 million, exceeding the consensus estimate of $604.5 million. Venture Global surged more than 6% following a favorable resolution of a liquified natural gas dispute with Repsol SA involving shipments from its Louisiana export facility. Datadog climbed more than 5% after Stifel upgraded the stock to buy with a $160 price target. Karman Holdings and Sphere Entertainment each gained more than 5% following analyst upgrades, with Raymond James and BTIG respectively raising their ratings.

However, not all earnings reports supported the stock market rally’s positive trajectory. Abbott Laboratories declined more than 7% after reporting fourth-quarter net sales of $11.46 billion, falling short of the consensus target of $11.80 billion. McCormick & Co dropped more than 5% as the company guided full-year adjusted earnings per share to a range of $3.05-$3.13, below the consensus of $3.23. Huntington Bancshares slipped more than 3% following a fourth-quarter return on average assets of 0.93%, disappointing relative to consensus expectations of 1.13%. Mobileye and Landstar Systems also struggled, posting declines of more than 2% each due to full-year revenue and earnings forecasts coming in below market expectations.

Interest Rate Markets React to Stock Market Strength

Today’s stock market rally pressured Treasury securities as investors rotated away from safe-haven demand. March 10-year note futures declined 5 ticks, with the 10-year yield climbing 2.0 basis points to 4.263%. The retreat in bond prices reflected not only the outperformance of equities but also rising inflation expectations, evidenced by the 10-year breakeven inflation rate reaching a 3.25-month high of 2.367%.

Additional pressure on Treasury securities came from President Trump’s reported reluctance to nominate Kevin Hassett as the next Federal Reserve Chair, instead preferring to retain him as National Economic Council director. Market participants had viewed Hassett as the most dovish candidate and frontrunner for the Fed position. The possibility that a more hawkish alternative such as Kevin Warsh—the second-most-likely candidate in market probability assessments—could be selected would likely prove bearish for fixed income securities.

European government bond markets displayed mixed performance during today’s trading. The 10-year German bund yield decreased 0.5 basis points to 2.877%, while the 10-year UK gilt yield climbed to its highest level in two weeks at 4.495%, representing an increase of 1.1 basis points to 4.468%. Swap pricing suggests the European Central Bank faces zero probability of implementing a 25 basis point rate hike at its February 5 policy meeting, a fact that may limit upside for European government bond yields.

What to Watch: Upcoming Economic Releases and Policy Developments

Several significant economic announcements remain on this week’s calendar that could influence the stock market rally trajectory. Today includes releases of November personal spending (expected up 0.5% month-over-month) and November personal income (forecast to rise 0.4% month-over-month). The November core PCE price index—the Federal Reserve’s preferred inflation barometer—is anticipated to increase 0.2% month-over-month and 2.8% year-over-year.

Looking to Friday’s data calendar, the January S&P U.S. manufacturing purchasing managers’ index is expected to edge higher by 0.2 points to 52.0, while the final reading of the University of Michigan’s January consumer sentiment index is projected to remain unchanged at 54.0. Beyond the data flow, the Supreme Court’s delayed ruling on challenges to President Trump’s reciprocal tariffs adds uncertainty, as the court is entering a four-week recess without announcing when the next opinions will be released—suggesting at least another month before a ruling emerges.

The stock market rally will remain dependent on the interplay between economic resilience, earnings momentum, and policy developments surrounding both tariff implementation and Federal Reserve leadership. Investors should monitor how the ongoing earnings season unfolds and whether the positive beat rate can be sustained, as this may prove crucial to sustaining the current market momentum in coming weeks.