Morning Bid: Mixed megacaps and Tehran tensions

Market Overview and Key Developments

By Mike Dolan

Tech Giants' Earnings Performance

Jan 29 -  

Federal Reserve's Stance on Rates

What matters in U.S. and global markets today

Geopolitical Tensions and Market Impact

By Mike Dolan, Editor-At-Large, Finance and Markets

Commodity Prices and Economic Indicators

Global markets are digesting a torrent of new information on the earnings, currency and political fronts – yet they are holding up reasonably well. The S&P 500 eclipsed 7,000 points briefly on Wednesday and looks like it might do so again.

The Federal Reserve meeting yesterday – and the decision to leave rates unchanged – did nothing to disturb the existing market view. Chair Jerome Powell sidestepped most of the edgy questions about Fed independence. But now all eyes look to the oil market as U.S. tensions with Iran heat up.

I’ll get into all that and more below.

But first, check out my latest column on how a stronger euro could turn from a dream into a nightmare for Europe.

And listen to the latest episode of the Morning Bid daily podcast. Subscribe to hear Reuters journalists discuss the biggest news in markets and finance seven days a week.

MIXED MEGACAPS AND TEHRAN TENSIONS

The varying fortunes of U.S. tech giants amid their AI spending splurge became apparent on Wednesday as the megacap earnings releases got underway.

While Meta’s stock surged as much as 10% overnight on plans for a whopping 73% increase in capital spending this year, Microsoft fell back more than 6% on disappointing results from its cloud computing business.

Tesla was up 2% as it switched focus from ebbing EV sales to AI spending and robotaxis. Apple reports later on Thursday.

As expected, the Federal Reserve left rates unchanged on Wednesday, with Chair Jerome Powell citing a “clearly improving” economic outlook and sounding relaxed about labor market strains and above-target inflation. He indicated that any renewed easing likely wouldn’t come until mid-year, lobbing the ball into his successor’s court as he approaches the end of his term as chair in May.

Powell remained tight-lipped with reporters when asked about his future and the criminal probe launched by the Trump administration.

Long-term Treasury yields continue to nudge higher, however, with attention turning to rising oil prices. Crude benchmarks rose more than 1% on Thursday on fresh U.S.-Iran military tensions. President Trump on Wednesday threatened Iran with a “far worse” attack if it does not make a deal on nuclear weapons, prompting a firm response from Tehran, which said it would retaliate “like never before” to any U.S. action.

Trump is reportedly weighing options for targeted strikes against Iranian leaders and security forces to inspire renewed protests – with the objective, according to two U.S. sources, of creating conditions for “regime change”. One source noted that Trump has not yet made a final decision on military action.

Meantime, precious metals continued their stratospheric rise on Thursday, with gold nearing $5,600 per ounce and silver touching $120 per ounce. Gold prices have risen over $1,000 so far in January.

Both oil and gold are also supported by this week's plunge in the dollar across the world, with the greenback ebbing again on Thursday despite Treasury Secretary Scott Bessent's restatement of the U.S. government's slightly ambiguous “strong dollar” policy yesterday.

Chart of the day

Meta's stocks surged 10% overnight as a 24% jump in revenue in the December quarter and a forecast-beating first quarter outlook helped fund data center spending, which is expected to rocket by 87% this year to $135 billion. Microsoft's shares fell 6% on its results, however, as somewhat disappointing growth in its Azure cloud-computing business questioned its huge AI-related capital spending.

Today's events to watch

* U.S. November trade balance (8:30 AM EST), revised Q3 labor productivity (8:30 AM EST), weekly jobless claims (8:30 AM EST), November manufacturers’ new orders (10:00 AM EST)

* U.S. 7-year note auction (12:00 PM EST)

* Chinese President Xi Jinping holds a press conference with British Prime Minister Keir Starmer

* U.S. corporate earnings: Apple, Blackstone, Caterpillar, Comcast, Dow, Honeywell, Lockheed Martin, Mastercard, Visa

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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

(By Mike Dolan)