Wall Street Brief (January 28): S&P 500 and Nasdaq hit new highs, Dow falls against the trend; US Dollar plunges to a 4-year low, gold continues its sharp rise; UnitedHealth drags down the healthcare sector

[Summary] The US stock market saw divergent performances on Tuesday. The S&P 500 Index rose by 0.41%, setting a record closing high, and the Nasdaq Index gained 0.91%, while the Dow Jones Industrial Average dropped 0.83% against the trend, and the Russell 2000 small-cap index increased by 0.26%. The main reason for the Dow's weak performance was the heavy blow to UnitedHealth - CMS announced that the Medicare Advantage rate for 2027 would increase by only 0.09%, significantly lower than the market expectation of 4-6%. UnitedHealth plummeted 19% in one day, dragging down the Dow by more than 330 points. Tech stocks led the gains amid earnings week expectations. In terms of major asset classes, gold surged by 3.44%, hitting an all-time high of $5,185 during trading, crude oil soared by 2.86% to $62.70 driven by tensions in Iran, Bitcoin gained 1.1%, and the US Dollar Index plunged by 1.31% to a four-year low.

I. Major Events

1. The impact of Medicare Advantage rate shocks triggered a collapse in the healthcare sector

CMS announced that the Medicare Advantage payment rate for 2027 will increase by only 0.09%, far below the market expectation of 4-6%. After the news broke, the market quickly reassessed the profit outlook for insurance companies, putting significant pressure on the healthcare sector. UnitedHealth plummeted by 19%, recording its largest-ever single-day drop, wiping out approximately $600 billion in market value. Humana fell more than 20%, CVS fell by 10%. The healthcare sector collectively lost about $800 billion in market value in one day. Meanwhile, UnitedHealth also forecasted a 2% decline in revenue for 2026, marking the company’s first annual revenue decline since 1989.

2. Risk of government shutdown spikes above 70%

The risk of a US government shutdown is increasing. Democrats opposed DHS funding due to ICE enforcement-related deaths, and Senate Minority Leader Schumer stated he would not support a $1.2 trillion spending bill that includes DHS funds. The trigger was the January 24 killing of a US citizen in Minnesota by an ICE agent, marking the second fatal incident involving federal law enforcement this month. Economists estimate the probability of a shutdown has exceeded 70%, affecting 80% of annual appropriations. Safe-haven sentiment has risen, providing strong support for gold.

3. General Motors' earnings exceeded expectations, surging 8.8%.

In terms of earnings reports, General Motors' Q4 adjusted earnings per share was $2.51, surpassing the market expectation of $2.27. The company also raised its full-year 2026 profit guidance and announced a 20% dividend increase along with a $6 billion stock repurchase plan. Despite tariff pressures, the company estimated its 2025 tariff costs at $3.1 billion, lower than expected, further reinforcing the market's confidence in its profitability resilience. Amid the painful transition to electric vehicles, the traditional automaker’s signal of 'protecting profits' was embraced by the market, leading to an 8.8% surge in General Motors' stock price in a single day.

II. Major Trends

From a medium-term perspective, small-cap stocks significantly outperformed large-cap stocks: Russell 2000 rose 8.78% over three months, far exceeding the S&P 500's 2.40%. In the short two-week timeframe, IWM rose 4.82%, taking the lead, while QQQ fell 1.24%, showing the weakest performance. This divergence also reflects style shifts: SPYV gained 4.20% over three months, outpacing SPYG's 0.85%; over two weeks, value stocks rose 1.15%, while growth stocks fell 2.17%.

Market breadth remains healthy: RSP, the equal-weighted index, rose 4.94% over three months, outperforming the market-cap-weighted SPY's 2.40%, indicating that the rally wasn’t driven solely by a few heavyweight stocks. However, in shorter cycles, pressure on tech giants is more evident—MAGS dropped 3.43% over two weeks, with SPY, SPYG, and MAGS all showing signs of accelerating short-term declines. Sector-wise, industrials rose 5.00% over three months, outperforming technology's 0.93%, reflecting capital favoring traditional sectors.

III. Market Sentiment

Market sentiment remains mildly optimistic. The VIX fear index closed at 16.35, up slightly by 1.24%. Despite lingering concerns about government shutdown risks and Federal Reserve uncertainty, volatility remains relatively low, suggesting the market isn't aggressively pricing in short-term tail risks. CNN’s Fear & Greed Index rose from 59 to 64, entering the 'greed' zone, with record highs in the S&P further boosting risk appetite.

From a market structure perspective, equal-weighted indices continue to outperform market-cap-weighted indices, with broad participation in the rally. In the options market, the Put/Call ratio dropped to 0.56, significantly below the cautionary threshold of 0.8, indicating strong bullish sentiment but also hinting at potential overheating in the short term.

IV. Market Scan

1. Index ETFs

Nasdaq ETF (QQQ) rose 0.91%, supported by optimistic expectations heading into earnings week, with tech heavyweights propping up the index. Dow ETF (DIA) fell 0.81%, primarily pressured by UnitedHealth's 19% plunge in a single day—due to the Dow's price-weighted mechanism, fluctuations in high-priced stocks have a more direct impact on the index. From a style and momentum perspective, small caps led with a two-week gain of 4.82%, while tech stocks lagged with a 1.24% decline over the same period, indicating ongoing sector rotation.

2. Industry Sectors

The technology sector (XLK) led gains with a 1.35% rise, driven by positive expectations during earnings week and semiconductor strength, with AI demand continuing to provide support. The healthcare sector (XLV) fell 1.68%, triggered by a mere 0.09% increase in Medicare Advantage rates, causing widespread declines in insurance stocks, with UnitedHealth, Humana, and CVS all under pressure. Utilities (XLU) rose 1.31%, attracting defensive flows amid government shutdown risks and interest rate uncertainties, contrasting with the pullback in healthcare.

3. Seven Major Tech Stocks

Microsoft (MSFT) rose 2.19%, set to release its Q2 earnings after Wednesday's close, with relatively positive market expectations. Sentiment was bolstered by AI chip-related news, while the impact of Q1 earnings per share of $4.13 surpassing expectations continued to resonate. Tesla (TSLA) fell 0.99%, extending recent adjustments, with its earnings also due on Wednesday; concerns over FSD price hikes and delivery data continue to weigh on the stock.

4. Chinese概念股

Bilibili (BILI) rose 3.43%, supported by a sharp drop in the dollar boosting ADR valuations, with the stock also experiencing a technical rebound near $26, prompting several institutions to raise their target prices. JD.com (JD) fell slightly by 0.94%, with ongoing divergence among Chinese stocks amid growing concerns about intensifying e-commerce competition.

5. Cryptocurrencies and related stocks

Bitcoin's latest price is around $96,300 (US Eastern Time 16:00), up 1.1%, supported by a weaker US dollar and safe-haven demand. Riot Platforms (RIOT) surged 8.13% after signing a long-term data center lease agreement with AMD to expand its business structure, while also benefiting from the rise in Bitcoin, driving overall strength in mining stocks. Robinhood (HOOD) fell 1.64% as sentiment in the brokerage sector turned cautious amid rising risks of a government shutdown.

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

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