Wall Street Brief (January 14): US stocks surged then retreated on Tuesday, with bank stocks dragging down the market. Rising tensions in Iran pushed oil prices higher, gold hit a new intraday high, and Bitcoin surged.

[Summary] US stocks surged then retreated on Tuesday, with major indices closing lower across the board. The S&P 500 fell 0.19%, Nasdaq dropped 0.10%, Dow Jones declined 0.80%, and Russell 2000 edged down 0.10%. December CPI met expectations, and core inflation came in below forecasts, briefly driving a market rebound at the open. However, the inflation data did not significantly alter rate cut expectations. JPMorgan's earnings report beat expectations, but its guidance on expenses disappointed the market, with the financial sector leading declines in US stock industry ETFs and weighing on the broader market. Tensions with Iran escalated further, pushing oil prices up 1.72%, with WTI crude hitting a more-than-one-month high. Gold hit a new intraday high but closed slightly lower by 0.22%. Bitcoin surged 4.51% as corporate buy-in news boosted market sentiment.

I. Major Events

1. December CPI met expectations, with core inflation hitting a near four-year low.

The US December CPI rose 2.7% year-on-year, meeting expectations, while core CPI increased 2.6% year-on-year, below the expected 2.8%, marking the lowest since March 2021. Housing costs contributed the most, rising 0.4% month-on-month, while food prices saw their largest increase since 2022, climbing 0.7%. Inflation data provided short-term support, briefly lifting the market, but did not lead to a significant shift in expectations for rate cuts. CME FedWatch shows the probability of maintaining rates unchanged in January rose to 95%.

2. Trump announces a 25% tariff on Iranian business partners.

Trump posted on Truth Social that any country doing business with Iran will be subject to a 25% tariff, "effective immediately." This move implies that China's export tariffs to the US could rise to 45%. The Chinese Foreign Ministry responded by stating that "a tariff war has no winners." The tariff announcement quickly fueled risk aversion and supply concerns, driving crude oil higher. WTI rose to approximately $59.7 per barrel, hitting a more-than-one-month high, while the energy sector led gains.

3. JPMorgan's earnings report beat expectations, but its expense guidance disappointed the market.

JPMorgan’s Q4 adjusted EPS was $5.23, with revenue at $46.77 billion, both exceeding expectations. However, raising its 2026 expense guidance to $105 billion sparked market concerns. Investment banking fees fell 5% year-over-year, below the company’s own guidance. CEO Jamie Dimon warned that tariffs could lead to a 10% market correction. Amid the disparity between 'good results and tight guidance,' JPM shares fell 4.2%, making the financial sector one of the biggest losers of the day.

II. Major Trends

Over a three-month horizon, the Dow (DIA) rose 5.55%, outpacing the Nasdaq (QQQ)’s 3.36%. Recently, traditional industry leaders rather than tech stocks have driven the Dow higher, reflecting clear signs of capital rotation. Over a two-week period, tech giants faced short-term pressure, with the MAGS tech giant ETF dropping 1.91%. META led declines due to its AI infrastructure spending plan. Additionally, value stocks showed adjustment signals, as SPYV’s two-week gains turned negative, indicating weaker short-term momentum. Mild inflation data provided some relief, but the market still expects rate cuts to be delayed until June.

III. Market Sentiment

Market sentiment has become more cautious. The VIX fear index closed at 15.98, up 5.69%, remaining within the normal range (15-20), but volatility has become more pronounced. CPI data, bank earnings reports, and uncertainty surrounding Trump's tariff policy successively disrupted markets, cooling investor risk appetite. CNN's Fear & Greed Index fell from 59 the previous day to 56, marking a continued decline. Index pullbacks, weakness in bank stocks, and heightened geopolitical tensions collectively weighed on market sentiment.

In terms of market breadth, despite the index closing lower, 44 S&P 500 components hit new 52-week highs, continuing structural divergence: energy and defense sectors remained strong, while finance and technology faced relative pressure.

IV. Market Scan

1. Index ETFs

All four major indices closed lower but with limited losses. The Dow ETF (DIA) led declines with a drop of 0.80%, mainly dragged down by JPMorgan's share price retreat after its earnings report; the small-cap ETF (IWM) fell just 0.06%, showing stronger resilience. Overall, large-cap blue chips faced greater pressure.

2. Industry Sectors

Sector performance diverged significantly. The energy sector (XLE) led gains with a 1.42% increase, as oil and gas stocks rallied following a surge in crude oil prices. Consumer staples (XLP) rose 1.16%, continuing to exhibit defensive characteristics amid rising uncertainty. The financial sector (XLF) fell 1.92%, pressured by a 4.2% drop in JPMorgan's stock price and ongoing disruption from Trump's proposed credit card interest rate cap, weighing on the entire banking sector.

3. Seven Major Tech Stocks

Within M7 stocks, there was notable divergence. Google (GOOG) rose 1.11% to hit a new all-time high, appearing more resilient amid overall tech sector weakness. The market continues to bet on its AI search integration and cloud business growth. Meta (META) fell 1.69% after Zuckerberg announced the expansion of the “Meta Compute” initiative to scale AI infrastructure to "tens of gigawatts," with projected capital expenditure exceeding $100 billion by 2026, raising concerns. Meanwhile, news of an approximate 10% workforce reduction in the Reality Labs division added to worries over costs and returns.

4. Chinese概念股

Chinese equities retreated collectively, pressured by the news related to Iranian tariffs. PDD Holdings (PDD) dropped 5.40%, performing weakest among Chinese stocks, as concerns over external conditions and growth expectations intensified. JD.com (JD) fell 2.77%, Futu (FUTU) dropped 2.14%, also affected by sentiment. Alibaba (BABA) edged up 0.42%, relatively resilient, highlighting clear signs of capital divergence.

5. Cryptocurrencies and related stocks

Bitcoin surged by 4.51%, with the latest price quoted in the range of approximately $91,000-$92,500. MicroStrategy announced that it purchased 13,627 Bitcoins between January 5 and 11 at a total cost of about $1.25 billion, increasing its holdings to 687,410 Bitcoins, which boosted market sentiment. MSCI decided not to exclude digital asset companies, seen as recognition of MicroStrategy’s (MSTR) 'digital asset treasury' model. MicroStrategy (MSTR) shares soared by 6.63%. Palantir (PLTR) slightly fell by 0.25%, showing a lackluster performance.

$NASDAQ 100 Index (.NDX.US)$ $Invesco QQQ Trust (QQQ.US)$ $Dow Jones Industrial Average (.DJI.US)$ $State Street® SPDR® Dow Jones Industrial Average® ETF Trust (DIA.US)$ $Russell 2000 Index (.RUT.US)$ $iShares Russell 2000 ETF (IWM.US)$ $Roundhill Magnificent Seven ETF (MAGS.US)$ $USD (USDindex.FX)$ $U.S. 10-Year Treasury Notes Yield (US10Y.BD)$ $iShares 20+ Year Treasury Bond ETF (TLT.US)$ $XAU/USD (XAUUSD.CFD)$ $CBOE Volatility S&P 500 Index (.VIX.US)$ $Bitcoin (BTC.CC)$ $BTC/USD (BTCUSD.CC)$ $Ethereum (ETH.CC)$ $ETH/USD (ETHUSD.CC)$ $iShares Ethereum Trust ETF (ETHA.US)$ $NVIDIA (NVDA.US)$ $Tesla (TSLA.US)$ $Meta Platforms (META.US)$ $Amazon (AMZN.US)$ $Alphabet-C (GOOG.US)$ $Microsoft (MSFT.US)$ $Apple (AAPL.US)$ $Netflix (NFLX.US)$

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