The S&P 500 ended lower on Friday, as investors took a breather following a week of record-breaking gains fuelled by pro-business optimism and global monetary easing. Profit-taking and cautious sentiment ahead of a busy week of corporate earnings and Federal Reserve decisions drove a 0.3% drop in the index, with the Nasdaq and Dow also closing in the red. Despite the day’s losses, markets maintained back-to-back weekly gains, reflecting continued optimism about economic growth and stability under the new administration.

Key Takeaways:

  • S&P 500 Retreats from Record Highs: The S&P 500 fell 0.3% on Friday, closing at 6,101.24 after hitting an intraday record earlier in the session. The pullback marked the end of a four-day winning streak, as investors took profits ahead of a pivotal week featuring corporate earnings and the Federal Reserve meeting. 
  • Dow Drops 140 Points: The Dow Jones Industrial Average shed 140.82 points, or 0.3%, to close at 44,424.25, ending a strong week of gains. The index rose 2.2% for the week. While Friday’s losses weighed on the index, investors remain optimistic about future growth.
  • Nasdaq Declines as Tech Stocks Slide: The Nasdaq Composite fell 0.5% to end the day at 19,954.30. Megacap tech stocks, which have fuelled recent market rallies, faced profit-taking, with Nvidia declining over 3% and Tesla slipping more than 1%. Despite Friday’s losses, the Nasdaq recorded a 1.7% gain for the week.
  • European Markets End Slightly Lower Amid Mixed PMI Data: The pan-European Stoxx 600 index dipped 0.05% on Friday but notched a 1% weekly gain, driven by strong earnings and optimism about US policy developments. France’s CAC 40 rose 0.44% to close the week in positive territory, while Germany’s DAX and the UK’s FTSE 100 slipped 0.08% and 0.73%, respectively. PMI data showed mixed signals for the Eurozone economy: January Manufacturing PMI rose to 46.1 from an expected 45.6, while Services PMI stood at 51.4, in line with forecasts. In France, the Services PMI fell to 48.9, remaining below the 50 threshold for growth, while Germany’s Composite PMI rose to 50.1, crossing into expansion territory for the first time in seven months.
  • Asian Markets Mixed as Inflation Rises: Asia-Pacific markets mirrored Wall Street’s earlier optimism but showed mixed results by the end of Friday’s trading. Japan’s Nikkei 225 and Topix indices erased earlier gains to close flat at 39,931.98 and 2,751.04, respectively, following a Bank of Japan policy rate hike to 0.5%, its highest since 2008. Mainland China’s CSI 300 rose 0.77% to 3,832.86, while Hong Kong’s Hang Seng surged 1.67%. Australia’s S&P/ASX 200 advanced 0.36%, closing at 8,408.9, capping a third consecutive week of gains.
  • Oil Prices Post Weekly Decline: US West Texas Intermediate (WTI) crude futures rose marginally by 0.05% to settle at $74.66 per barrel on Friday, while Brent crude added 0.27% to close at $78.50 per barrel. Despite the slight uptick, oil prices posted weekly losses of 4.13% for WTI and 2.83% for Brent. 
  • Treasury Yields Little Changed: US Treasury yields showed minimal movement on Friday as markets absorbed President Trump’s remarks at the World Economic Forum. The yield on the 10-year Treasury fell 2 basis points to 4.619%, while the 2-year yield slipped below 4.266%. Investors remain cautious ahead of key Federal Reserve signals next week, with inflation and growth trends closely monitored for further direction.

FX Today:

  • EUR/USD Climbs Amid Recovery Momentum: EUR/USD advanced to 1.0492 on Friday, rising 0.74% for the day as the pair extended its rebound from recent lows near 1.0300. Despite the gains, the euro remains below its 50-day SMA at 1.0437, indicating lingering bearish sentiment. Immediate resistance is seen at 1.0500, with a breakout potentially targeting the 100-day SMA at 1.0691. On the downside, support lies at 1.0450, followed by the psychological 1.0400 level. Momentum indicators suggest further recovery, with RSI trending higher and MACD showing bullish crossover signals. 
  • GBP/USD Surges on Dollar Weakness: GBP/USD climbed to 1.2484, gaining 1.07% on Friday as broad US dollar weakness supported the pair. Breaking above its 50-day SMA at 1.2531, GBP/USD marked a key shift in momentum after weeks of consolidation near 1.2300. Resistance is now at 1.2500, with further gains potentially targeting 1.2600, a level last seen in mid-November 2024. On the downside, support is seen at 1.2450, followed by 1.2400. RSI has entered bullish territory, while MACD signals strong upward momentum, supporting the pair’s upward trajectory. 
  • USD/JPY Consolidates as BoJ Maintains Cautious Path: USD/JPY closed at 155.94, down 0.06% on Friday, as the pair consolidated within a narrow range following the Bank of Japan’s 25-basis-point rate hike to 0.5%. The pair faced resistance at 156.50, a level last tested in December 2024, with further upside targeting 157.50. On the downside, support is seen at 155.50, followed by the 100-day SMA at 151.41. RSI is near mid-levels, and MACD reflects a flat bias, signalling indecision in the market. The pair remains above its 200-day SMA at 152.80, maintaining a long-term uptrend. 
  • Canadian Dollar Gains on Rising Oil Prices: USD/CAD dropped 0.29% to close at 1.4338, as the Canadian dollar strengthened amid a slight recovery in oil prices. The pair tested support near the 50-day SMA at 1.4236, with immediate resistance at 1.4400. A break above this level could target the recent high of 1.4500. On the downside, support lies at 1.4300, followed by 1.4250. Momentum indicators suggest a weakening bullish bias, with RSI trending lower from overbought levels and MACD showing bearish crossover signals. Market participants are monitoring Canadian retail sales data and oil price movements for further direction.
  • Gold Nears Record High as Dollar Weakens: Gold prices rose 0.58% to $2,770 on Friday, extending gains as the US dollar weakened. The precious metal breached the $2,760 resistance level, opening the door for further upside. Resistance is now at $2,780, with a breakout potentially targeting the psychological $2,800 mark. On the downside, immediate support is at $2,750, followed by the 50-day SMA at $2,656. Momentum indicators support continued gains, with RSI in bullish territory and MACD showing strong upward momentum. Gold’s long-term uptrend remains intact, boosted by the 200-day SMA at $2,520.

Market Movers:

  • Novo Nordisk Jumps on Positive Trial Results: US-traded shares of Novo Nordisk surged by more than 8% after the pharmaceutical giant reported promising early-stage trial results for its amycretin obesity drug. 
  • Twilio Soars After Bullish Forecast: Twilio shares skyrocketed 20% following an upbeat long-term forecast presented at the company’s investor event on Thursday. The company projected its adjusted operating margin could reach as high as 22% by 2027. 
  • Ericsson Tumbles on Earnings Miss: Ericsson’s US-listed shares plunged by 14% after the company missed fourth-quarter earnings expectations. The telecommunications company reported an adjusted EBITA of 10.25 billion Swedish kroner, falling short of the consensus estimate of 10.69 billion Swedish kroner. 
  • Texas Instruments Slumps on Weak Guidance: Texas Instruments dropped 7.5% after issuing lacklustre guidance for its upcoming earnings. The semiconductor giant projected earnings per share between $0.94 and $1.16, falling below analysts’ estimates of $1.17, according to LSEG. The announcement raised concerns about slowing demand for chips in key markets.
  • CF Industries Falls After Downgrade: CF Industries shares fell 7.5% following a downgrade from JPMorgan to “underweight” from “neutral.” The bank cited risks of increasing domestic natural gas prices, a key input for nitrogen fertilizers, which could lead to downward revisions in earnings estimates for 2025 and 2026. 
  • NextEra Energy Rises on Earnings Beat: NextEra Energy shares climbed 5% after the company posted fourth-quarter adjusted earnings of $0.53 per share, in line with FactSet consensus estimates. The renewable energy company also issued full-year adjusted earnings guidance that met analysts’ expectations, providing reassurance about its growth trajectory in the clean energy sector.
  • American Express Slips on Slower Growth Outlook: American Express saw its shares fall by 1% after forecasting slower revenue growth in 2025 compared to 2024. Despite this, the company reported a fourth-quarter revenue beat and earnings in line with analyst estimates. The market reacted cautiously, reflecting concerns about future momentum.
  • NextEra Energy Rises on Earnings Beat: NextEra Energy shares climbed 5% after the company posted fourth-quarter adjusted earnings of $0.53 per share, in line with FactSet consensus estimates. 

As the week concludes, the S&P 500 retreated from record highs on Friday, ending a four-day winning streak, while still securing a second consecutive week of gains. The Nasdaq and Dow followed suit, pressured by profit-taking in key sectors like technology, despite broader investor confidence in pro-business policies and easing global monetary conditions. European and Asian markets posted varied performances, with stronger economic data from the Eurozone and growth optimism in Asia balancing inflation concerns. Meanwhile, gold surged closer to record levels, driven by a weaker US dollar and demand for inflation hedges. With corporate earnings, Fed policy decisions, and key economic data on the horizon, investors remain vigilant about the direction of markets in the coming week.