Wall Street Daily (January 16): Major US stock indices closed higher across the board, with small-cap stocks leading the gains; semiconductor and banking stocks performed strongly, momentum in tech giants weakened, and the Magnificent Seven showed clear divergence

[Summary] US stocks rebounded on Thursday after two consecutive days of declines, closing higher across the board. The S&P 500 rose 0.26%, Nasdaq climbed 0.25%, Dow Jones gained 0.60%, and the Russell 2000 small-cap index led with a rise of 0.86%. Taiwan Semiconductor's earnings exceeded expectations and it significantly raised its capital expenditure guidance for 2026, easing market concerns about a peak in AI investment. However, short-term declines accelerated for the MAGS tech giant ETF, and there was noticeable divergence within the M7. In major asset classes, geopolitical risk premiums fell rapidly, causing crude oil to plummet 3.03%; Bitcoin dropped 1.39% due to the Senate postponing discussions on crypto legislation; gold slipped slightly by 0.22%, while the US dollar index rose 0.27%.

I. Major Events

1. Taiwan Semiconductor's earnings beat expectations, with 2026 capital expenditure guidance far exceeding expectations

Taiwan Semiconductor's Q4 net profit increased by 35% year-over-year, with revenue reaching 1.046 trillion New Taiwan dollars, surpassing market expectations. More importantly, the company provided 2026 capital expenditure guidance of $520-$560 billion, significantly higher than the $410 billion in 2025, while also forecasting annual revenue growth of nearly 30%. This signal refocused the market on the main theme of 'AI computing power is still expanding,' and Taiwan Semiconductor rose by 4.44%. Semiconductor sentiment heated up accordingly, with ASML surging 5.37% to hit a new all-time high, and NVIDIA rising by 2.13%, showing strong performance within M7.

2. Goldman Sachs' Q4 equity trading revenue sets a Wall Street record

Goldman Sachs' Q4 earnings per share came in at USD 14.01, significantly exceeding market expectations of USD 11.62. Equity trading revenue reached USD 4.31 billion, setting a new record for the highest single-quarter performance by any bank on Wall Street. Meanwhile, investment banking fees grew by 25% year-over-year, and the company raised its quarterly dividend to USD 4.50. The earnings report boosted the banking sector, with Goldman Sachs rising more than 4%. Morgan Stanley and Blackrock also delivered better-than-expected results, with Blackrock’s assets under management hitting a record USD 14 trillion, driving its stock price up by 5.93%.

3. Initial jobless claims at 198,000 were much lower than expected, indicating a robust labor market

For the week ending January 10 in the US, initial jobless claims came in at 198,000, below the expected 215,000, marking the lowest level this year. The unemployment rate dropped from 4.5% to 4.4%. The data suggests layoffs remain low and the labor market continues to be resilient, supporting the Federal Reserve's 'wait-and-see' stance to some extent. The probability of the January FOMC meeting being on hold remains above 95%.

II. Major Trends

1. Small-cap stocks continue to outperform large caps

The Russell 2000 (IWM) rose 3.50% over two weeks, leading the four major indices. Over a three-month horizon, small caps outperformed large caps by 2.8 percentage points (6.52% vs. 3.72%). Capital continues to flow from large-cap tech stocks into small and mid-cap stocks, reflecting optimism about the domestic economy and the potential benefits of Trump's policies for small businesses.

2. Value style continues to dominate

Value stocks (SPYV) outperformed growth stocks (SPYG) by 3.25 percentage points over three months (5.52% vs. 2.27%). Industrial stocks (DIA) outpaced tech stocks (QQQ) by 4.46 percentage points during the same period (7.20% vs. 2.74%). Better-than-expected bank earnings further strengthened the relative attractiveness of cyclical/value stocks.

3. Momentum of tech giants weakens

Although Taiwan Semiconductor’s earnings report boosted semiconductor stocks, the MAGS tech giants ETF saw an accelerated short-term decline – with the two-week drop expanding from -0.30% the previous day to -0.95%. There was also significant divergence within M7: NVIDIA led with a 2.13% gain, while Google lagged with a -0.94% decline.

III. Market Sentiment

Market sentiment has clearly improved, with risk appetite recovering rapidly from mid-week lows. The VIX fear index closed at 15.84, plunging 5.43%, retreating quickly from the recent high of 16.75 the previous day. At 15.84, it is within the normal volatility range (15-20), showing that panic accumulated on Wednesday due to concerns over Iran's situation and the Fed's independence has quickly dissipated. The CNN Fear & Greed Index rose to 62 (from 61 the previous day), staying in the greed zone. Better-than-expected bank earnings, strong unemployment claims data, and easing Iran risks collectively bolstered investor confidence.

The AAII retail sentiment survey showed bullish sentiment rising to 49.5%, up 7 percentage points from the previous month, the highest level since November 2024. Neutral sentiment hit a one-year high of 30.4% the previous week but turned significantly more optimistic this week. In terms of market breadth, 70% of S&P 500 components are trading above their 50-day moving average, and 67% above their 200-day moving average. The RSI rose to 64 but is not overbought (overbought threshold is 70).

IV. Market Scan

1. Index ETFs

The Russell 2000 (IWM) rose 0.88%, leading the four major indices, as small-cap stocks continued their trend of outperforming large caps for several consecutive days. The S&P 500 (SPY) gained 0.27%, rebounding from two consecutive days of declines due to strong earnings reports from Taiwan Semiconductor and banks. Capital continued rotating from large-cap tech stocks to small- and mid-cap stocks, reflecting investors' preference for more reasonably valued targets.

2. Industry Sectors

Utilities (XLU) led all sectors with a 1.02% gain, benefiting from expectations of growing electricity demand driven by AI data centers (projected to double by 2030) and valuation recovery in interest-rate-sensitive assets. The Energy sector (XLE) fell 0.94%, dragged down primarily by a sharp drop in oil prices—after Trump signaled a softer stance on Iran, geopolitical risk premiums quickly receded; meanwhile, a significant rise in U.S. crude oil inventories and the EIA lowering its 2026 oil price forecast further intensified market concerns over supply and demand.

3. Seven Major Tech Stocks

NVIDIA (NVDA) led the Magnificent Seven (M7) with a 2.13% increase, mainly driven by Taiwan Semiconductor's better-than-expected earnings report. Taiwan Semiconductor’s upward revision of its 2026 capital expenditure reinforced market confidence in the AI computing power supply chain’s growth prospects. Baird analysts reiterated their 'Outperform' rating and named it their top pick for 2026. Alphabet (GOOG) lagged behind, falling 0.94%, lacking fresh catalysts and reflecting internal rotation and profit-taking pressures within the M7 (following a cumulative 65% rise since 2025).

4. Chinese概念股

Chinese stocks showed notable divergence. Futu (FUTU) gained 1.41%, demonstrating relative resilience. Tencent Music (TME) plummeted 4.93%, with trading volume down 76% from the average, signaling tightened liquidity without clear stock-specific catalysts. NetEase (NTES) fell 2.09%, tracking broader declines across Chinese stocks.

5. Cryptocurrencies and related stocks

The Senate postponed discussions on cryptocurrency legislation, causing Bitcoin to drop 1.39% on the day. Circle (CRCL) plunged 9.67%, becoming the session’s biggest loser after Coinbase’s CEO criticized the draft bill as having “too many issues” that could “stifle” stablecoin returns—Circle, the issuer of USDC, was hit hardest emotionally. Technical analysts warned that Circle might fall to $46. Palantir (PLTR) declined 0.75%, showing relatively steady performance.

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

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