Wall Street Inches Up Amid AI-Driven Trading
Major US stock indexes showed modest gains during a volatile trading session on Friday. Investors returned to artificial intelligence-related chip stocks, providing a boost to the market. The Dow Jones Industrial Average rose 0.03% to 49,458.62. The S&P 500 increased by 0.10% to 6,951.62. The Nasdaq Composite climbed 0.12% to 23,558.38.
Despite these gains, the indexes were heading toward weekly losses. This occurred even though the Dow and S&P 500 reached record closing highs earlier in the week.
Chipmaker Results Fuel AI Optimism
Strong quarterly results from Taiwan Semiconductor Manufacturing Company (TSMC) reignited enthusiasm for AI-related stocks. Market analysts noted this provided much-needed support for technology names that had struggled in recent months.
"The TSMC report yesterday was pretty solid and sounded optimistic," said Tony Sycamore, a market analyst at IG. "It certainly provided a much-needed shot in the arm for those AI names."
A new trade agreement between the United States and Taiwan also influenced market sentiment. The deal reduces tariffs on many semiconductor exports and directs investments toward the US technology industry. While this risks angering China, it could benefit businesses within the supply chain.
Financial Sector Faces Weekly Pressure
The financial sector experienced its worst week since October. This decline came partly from a proposal by former President Donald Trump to cap credit card interest rates. Strong quarterly earnings from major US banks offered some positive signs for the broader economy despite this pressure.
Consumer staples, real estate, and utilities sectors led weekly gains. These areas are generally less susceptible to economic downturns. Some investors shifted money out of large technology companies into smaller cap stocks in search of better value.
Dollar Strength and Currency Movements
The US dollar held below a six-week high reached on Thursday. It was poised for a third consecutive weekly gain. Measured against a basket of currencies, the dollar rose 0.05% to 99.39.
Strong US labor market data supported the dollar's strength. This unexpected strength delayed expectations for further interest rate cuts by the Federal Reserve. Markets now price only a 20% chance of a rate cut in March, down from approximately 50% a month ago.
Yen Intervention Watch
Japanese Finance Minister Satsuki Katayama put currency traders on alert. She refused to rule out any options to counter weakness in the yen. The Japanese currency strengthened 0.32% against the dollar to 158.15 per dollar following her comments.
The euro declined 0.08% to $1.1597 against the dollar. Treasury yields moved higher after Trump's remarks about keeping economic adviser Kevin Hassett in his current role. The yield on benchmark US 10-year notes increased by 5.9 basis points to 4.219%.
Commodity Market Movements
Gold Retreats from Safe Haven Demand
Gold prices fell more than 1% before recovering slightly. The precious metal was quoted 0.57% lower at $4,588.23 per ounce. Investors booked profits as demand for safe haven assets waned.
Geopolitical and economic uncertainty typically supports gold prices as investors seek safety. However, gold is priced in US dollars, meaning dollar strength makes it more expensive for international buyers.
Oil Prices Rise on Supply Concerns
Oil prices increased despite receding prospects of US intervention in Iran. Lingering concerns about supply risks in the wake of unrest in Iran supported prices. Traders also positioned themselves ahead of the long weekend.
US crude rose 1.03% to $59.80 per barrel. Brent crude increased 1.05% to $64.43 per barrel. Analysts expect higher oil supply this year, which could limit price increases.
Market Context and Political Developments
Just two full trading weeks into 2026, investors have faced multiple global developments. These include Trump's intervention in Venezuela, his stated desire to take over Greenland, and his threat to indict Fed Chair Jerome Powell. The latter raised concerns about central bank independence.
US indexes turned lower temporarily while Treasury yields ticked up after Trump said he might keep economic adviser Kevin Hassett in his current role. This eroded expectations that Hassett would succeed Fed Chair Jerome Powell.
Hassett had been seen as the front-runner for the Fed chair position. He has echoed Trump's calls for lower interest rates. Analysts questioned whether his appointment would undermine the Fed's independence from short-term political pressures.
Betters on Polymarket pushed the odds of former Fed Governor Kevin Warsh becoming the next Fed chair to 57% from 44%.
The Martin Luther King Jr. Day holiday will close US markets on Monday. The earnings season continues next week with results expected from Netflix, Johnson & Johnson, and Intel.
