U.S. stock benchmarks finished Friday with a split tape, leaving the Nasdaq Composite modestly higher while the Dow Jones Industrial Average pulled back. The Nasdaq climbed 0.28% to 23,501.24, aided by strength in large-cap technology names. The Dow dropped 285.30 points, or 0.58%, to 49,098.71, partly driven by a near 4% decline in Goldman Sachs. The S&P 500 barely moved, edging up 0.03% to 6,915.61.
Markets recovered some of their earlier losses midweek after President Donald Trump abandoned plans to impose tariffs on imports from eight European nations that had been scheduled to take effect on Feb. 1. He also said he had reached a "framework of a future deal" with NATO Secretary General Mark Rutte concerning Greenland, comments that helped soothe investor nerves.
Those positive developments on Wednesday and Thursday erased prior weakness for the Dow, but Friday's pullback pushed the index back into weekly negative territory. For the week, the Dow finished down roughly 0.5%, the S&P 500 slipped about 0.4%, and the Nasdaq was essentially flat, declining by less than 0.1% over the period.
Looking ahead, the focus for markets this week moves from geopolitics to corporate results and central bank policy. The fourth-quarter earnings season is getting underway in earnest, and the Federal Reserve is set to announce its policy decision on Wednesday. The central bank is widely expected to keep interest rates unchanged, following three consecutive quarter-point cuts in late 2025.
Market pricing still implies at least one additional rate reduction later in the year, based on LSEG data. At the same time, President Trump is considering a nominee to replace Fed Chair Jerome Powell, whose term concludes in May; an announcement could come soon, according to reporting in the period covered by market commentary.
Corporate earnings will likely dominate headlines this week, with roughly one-fifth of companies in the S&P 500 slated to report results. Among the high-profile names scheduled to post are Apple, Microsoft, Meta Platforms and Tesla. Aside from the megacap technology cohort, other notable companies reporting include Boeing, GM, IBM, Mastercard, and Visa.
Early results have generally been favorable. About 81% of companies that have reported so far have beaten profit expectations. LSEG now projects fourth-quarter earnings for the S&P 500 to have risen 9.1% year-on-year, with profit growth expected to exceed 15% in 2026.
A central line of inquiry for investors is whether firms are starting to realize returns from heavy investment in artificial intelligence. Large-scale spending on data centers and adjacent infrastructure was a headwind for AI-linked stocks late last year, after the sector had been a significant contributor to the prolonged U.S. equity rally. The market is watching to see if that capex is translating into tangible earnings gains.
Evercore ISI strategists, led by Julian Emanuel, summarized broader sentiment in a note, saying: "Tech enters 4Q25 earnings season with among the most downbeat sentiment of the AI Bull market, despite pockets of strength - a sharp contrast to sentiment into the prior quarter."
Analysts and strategists expect this earnings season to produce differentiated outcomes across companies rather than a uniform market move. Morgan Stanley said earnings season is likely to be "more of a stock-specific catalyst than an index-level driver," adding that in the U.S. investors should look for a strong EPS beat rate accompanied by elevated performance dispersion. The firm also noted that small caps have ended a historic outperformance run, though it believes underlying fundamentals remain intact.
Evercore ISI pointed out valuation dynamics within the market, noting that Information Technology is trading at its lowest next-12-month valuation premium to the S&P 500 in the post-pandemic period. It added that while the Mag7 group of stocks is in line with its post-pandemic average price-to-earnings, the other 493 names in the S&P 500 are trading near all-time high valuations.
Goldman Sachs weighed in with a sector-oriented outlook, recommending select consumer names, companies exposed to nonresidential construction, and small-caps as potential beneficiaries of an economic acceleration expected in early 2026. The firm observed that the equal-weight S&P 500 gains from this broadening, though it has less sensitivity to economic cycles than the sectors Goldman favors. Following strong returns in the Russell 2000, Goldman indicated that valuations may now look more attractive for the S&P MidCap 400 and the SmallCap 600 among SMID-cap groups.
Investors will be parsing a heavy flow of corporate reports for signs that AI spending and other strategic investments are beginning to pay off at the profit line. Given the current backdrop - a Fed likely to hold rates, continued market attention on megacap tech, and concentrated valuation distinctions across market segments - earnings are expected to produce notable dispersion among individual stocks this season.
Market participants will also keep an eye on any surprise developments related to U.S. tariff policy or Fed leadership choices, both of which could shift sentiment rapidly. In the near term, however, the combination of a packed earnings calendar and a pivotal central bank meeting is likely to set the tone for equity performance.