Manufacturing Strength Powers Stock Market Rally: Weekly Stock News Update

The equity markets delivered a positive session on Monday as strong U.S. manufacturing data renewed confidence in the economic outlook. The S&P 500 gained 0.54%, the Dow Jones Industrials advanced 1.05%, and the Nasdaq 100 climbed 0.73%, with March futures contracts following suit. This stock news reflected a broader shift in investor sentiment, driven primarily by better-than-expected factory activity and momentum in technology-related sectors.

ISM Data Sparks Risk-On Sentiment

The headline driver for stock market gains came from January’s ISM Manufacturing Index, which surged to 52.6—a 4.7-point jump that marked the strongest expansion pace in over 3.25 years. Market expectations had called for a reading of 48.5, so the outperformance caught many by surprise. This positive data fueled the initial rally, suggesting that U.S. economic momentum remains resilient despite recent headwinds.

However, the optimism faced headwinds from commentary by Atlanta Federal Reserve President Raphael Bostic, who signaled a more cautious path ahead. Bostic noted that the Fed should maintain a mildly restrictive policy rate stance given the economy’s current strength, and critically, he doesn’t anticipate any rate cuts throughout 2026. This hawkish guidance tempered some of the enthusiasm around lower borrowing costs, though it didn’t derail the broader stock market advance.

Chip Giants Rally While Energy Sector Stumbles

Among individual stock movers, semiconductor and AI infrastructure companies led gainers. SanDisk surged more than 15% after CTBC Securities initiated coverage with a buy rating, while Western Digital jumped over 7%. Other semiconductor names—including Seagate, Micron, Intel, Texas Instruments, Advanced Micro Devices, and Microchip Technology—all posted solid gains of 2% to 5%. These companies benefited from both the broader market optimism and sector-specific tailwinds.

Airlines represented another notable strength area, as a 4% decline in WTI crude oil prices reduced fuel costs and lifted profit margins. United, Delta, Southwest, and Alaska Air each climbed more than 4%, capitalizing on the energy price decline and renewed confidence in consumer spending patterns implied by the strong manufacturing data.

By contrast, energy producers faced significant selling pressure. With crude oil retreating sharply amid easing geopolitical tensions—President Trump signaled active negotiations with Iran—oil majors and independent producers declined. Diamondback Energy and Occidental Petroleum each fell more than 3%, while ConocoPhillips, Exxon Mobil, and Halliburton slipped over 2%.

The cryptocurrency-exposed equity complex faced particular weakness. Bitcoin plunged over 7% to a 9.75-month low, triggering nearly $590 million in long position liquidations. Galaxy Digital dropped more than 7%, MicroStrategy fell over 6%, Marathon Digital and Coinbase retreated 3% or more, and Riot Platforms declined 0.84%.

Fed Rate Outlook Weighs on Bond Markets

Interest rate markets reflected the hawkish shift in Fed guidance. March 10-year Treasury note futures fell by 7.5 ticks, while the 10-year yield rose 3.2 basis points to 4.269%. The combination of stronger manufacturing data and President Trump’s recent nomination of Kevin Warsh—viewed as more inflation-focused than alternative candidates—pressured Treasury valuations.

The 10-year yield even touched a 1.5-week high of 4.281% intraday. Warsh’s tenure as a Fed Governor from 2006-2011 was marked by emphasis on inflation risks, so market participants are pricing in a less dovish policy environment should he assume the chair.

European government bond yields traded mixed. The 10-year German bund yield rose 2.5 basis points to 2.868%, while the 10-year UK gilt yield fell 1.5 basis points to 4.506%. Eurozone manufacturing PMI for January was revised slightly upward to 49.5, barely showing contraction. Meanwhile, the ECB faces a 2% probability-weighted chance of a 25 basis point rate hike at Thursday’s policy meeting, though markets assign minimal odds to such action.

China Economy Signals Weakness, Tempering Global Growth Outlook

International stock markets delivered a mixed picture, with concerning signs from China tempering enthusiasm. The Shanghai Composite Index tumbled 2.48% to a four-week low after manufacturing PMI unexpectedly fell 0.8 points to 49.3, well below the 50.1 consensus. More troublingly, the non-manufacturing PMI posted a surprise 0.8-point decline to 49.4, marking the steepest contraction pace in three years.

This weakness suggested that China’s growth momentum has slowed meaningfully, creating headwinds for global commodity demand and manufacturing exports. Japan’s Nikkei 225 also declined, falling 1.25% from a 2.5-week high, while Europe’s Euro Stoxx 50 managed a modest 1.00% gain.

Government Shutdown Creates Minor Sentiment Drag

Adding to market complexities, the partial U.S. government shutdown entered its third day on Monday. The funding lapse weighed modestly on investor sentiment as lawmakers awaited House approval of a spending deal brokered between President Trump and Democratic leadership. However, markets viewed the disruption as likely short-lived, with House members returning from a week-long recess and expected to vote on the spending bill imminently.

Earnings Season Heats Up

Q4 earnings season is ramping up with 150 S&P 500 companies slated to report this week. So far, the results have been encouragingly positive stock news for the market, with 78% of the 167 companies that have reported beating earnings expectations. Analysts project S&P 500 earnings growth of 8.4% for the quarter—marking the tenth consecutive quarter of year-over-year expansion. Excluding the Magnificent Seven mega-cap technology stocks, earnings growth is expected to accelerate at 4.6%, a respectable pace given economic headwinds.

Individual earnings movers reflected mixed outcomes. Caterpillar surged over 5% on the strength of manufacturing data, while Teradyne advanced 4% after Alethia Capital initiated coverage with a buy recommendation. Conversely, Walt Disney tumbled over 7% after disappointing guidance on second-quarter outlook, IDEXX Laboratories fell 4% on below-consensus gross margins, and Tesla slipped 2% amid signs of continued weakness in European vehicle sales.

Market Focus Ahead

Traders are now calibrating for several key data points in the coming week. The January ADP employment report is expected to show a gain of 45,000 positions, followed by the January ISM services index forecast at 53.5. Weekly unemployment claims are anticipated to rise modestly by 3,000 to 212,000 on Thursday, and the University of Michigan consumer sentiment index is projected to decline 1.5 points to 54.9 on Friday.

Market pricing currently assigns just a 12% probability to a 25 basis point rate cut at the March 17-18 Fed meeting, reflecting the more restrictive stance signaled by recent Fed commentary. This stock news backdrop suggests that investors remain focused on the sustainability of economic growth while pricing in a longer period of elevated rates.