Utilities and healthcare lifted European equities to new highs, while U.S. markets digested mixed bank earnings and a CPI report that kept the rate-path debate alive.
Global markets split on Wednesday as investors balanced cooling—but still-sticky—inflation, shifting interest-rate expectations, and a fresh round of earnings and policy headlines. In early U.S. trading, the SPDR S&P 500 ETF Trust (SPY) hovered near recent highs after a choppy start to the year, with index direction still heavily influenced by rates and the health of mega-cap tech.
In the U.S., December consumer inflation held at 2.7% year over year, reinforcing the view that the Federal Reserve can stay on hold near term even as markets continue to price in cuts later in 2026. The softer tone in core inflation helped keep hopes alive for easing later this year, but the bigger swing factor for equities has been earnings momentum and the political cross-currents surrounding monetary policy.
Financials were a notable pressure point after JPMorgan Chase (JPM) reported results that underscored how sensitive bank profitability has become to consumer credit rules and fee trends. The stock was weak in early indications, keeping a lid on broader “value” leadership even as parts of tech stabilized. Apple (AAPL) and NVIDIA (NVDA) were modestly higher premarket, a reminder that megacap resilience can mask softer breadth underneath the surface.
Europe, by contrast, leaned into defensives and rate-sensitive sectors. The STOXX 600 pushed to a record, led by utilities and healthcare—an echo of the market’s preference for steady cash flows as the macro outlook stays noisy. RWE and SSE rallied on auction-related tailwinds in offshore wind, while Orion jumped on guidance and AstraZeneca (AZN) rose after an AI-focused acquisition.
Across currencies, Japan’s yen weakened to an 18-month low near 160 per dollar amid election speculation and bond-market jitters—supportive for exporters, but close enough to prior stress levels that traders remained alert to potential intervention risk. In commodities, the inflation-and-rates narrative showed up most vividly in precious metals: gold pushed to record territory around $4,630/oz and silver briefly broke above $90/oz as investors leaned into the “lower rates later” thesis and hedged geopolitical uncertainty.
For investors, the near-term playbook looks familiar: equity upside still depends on whether earnings can outpace lofty expectations while inflation continues to glide lower—without reigniting policy volatility. The next catalyst will likely be whether upcoming results broaden beyond a handful of bellwethers, or whether markets remain a tug-of-war between rate relief and earnings realism.
