Stocks trended higher Thursday as President Donald J. Trump stepped onto the global stage for the first time during his second administration. Answering questions from a select panel at the Davos Economic Forum, President Trump gave comfort to market participants by promising to "demand" that interest rates come down "immediately."
Speculation about the timing and magnitude of promised new tariffs dominated commentary ahead of his appearance. But Trump stirred the pot in a different but not unexpected way during his live question-and-answer session with the Davos crowd.
"I'll demand that interest rates drop immediately and likewise they should be dropping all over the world," Trump said to business leaders from around the world. The yield on the 10-year U.S. Treasury note retreated from its intraday high of 4.664% following Trump's comments but closed at 4.648%, up from 4.599% on Wednesday.
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General hope that the Trump administration, at the risk of re-igniting inflation, won't be as aggressive as the Trump campaign on tariffs has given way to reliance on this explicit commitment to lower borrowing costs.
The bond market has settled down from its September-to-mid-January selloff, though the 10-year Treasury yield remains the most important indicator to watch right now.
At the closing bell, the blue-chip Dow Jones Industrial Average was up 0.9% to 44,565. The broad-based S&P 500, which established a new 52-week high, added 0.5% to 6,118.
And a late-day surge carried the Nasdaq Composite into positive territory in the aftermath of Wednesday's prodigious AI-driven rally, the tech-heavy index rising 0.2% to 20,053.
What about the Fed
The Federal Open Market Committee will gather next week for its first monetary policy meeting of 2025. Fed Chair Jerome Powell will host a press conference at 2:30 pm Eastern Time on Wednesday, January 29, following the release of the FOMC policy statement.
That press conference is sure to attract even more attention than usual given President Trump's "demand" on interest rates. Be sure to follow along with our live Fed blog for the latest on the January FOMC meeting.
Thirty-day fed fund futures prices suggest a 99.5% probability the Fed will hold the target range for the federal funds rate at 4.25% to 4.50%. Market participants continue to focus on the number and timing of rate cuts to come, with CME Group's FedWatch tool currently reflecting expectations for just one more that won't happen until the second half of the year.
The Fed has room to not move and can remain silent with data like initial jobless claims showing only seasonal and/or one-time-factor moves, such as the California wildfire bump for the week ended January 18.
According to LPL Financial Chief Economist Jeffrey Roach, "The labor market is historically tight but some sectors are slowing the pace of hirings. The weekly claims data suggest minimal stress in job markets."
Roach adds that as long as wage growth is outpacing inflation and the economy is chugging along, "the Fed will not cut rates as much as expected only a few months ago."
BAC rises despite Trump's Davos comments
In addition to his interest-rate promise, President Trump pounced on one particular member of the Davos panel.
But Bank of America (BAC) stock was up 1.3%, holding its solid gains even after Trump directly challenged CEO Brian Moynihan and the big bank's rumored reticence to do business with conservative customers during his Q-and-A session.
"You've done a fantastic job," Trump said to Moynihan, "but I hope you start opening your bank to conservatives, because many conservatives complain that the banks are not allowing them to do business within the bank."
Moynihan didn't respond to Trump's immediate challenge. But he did say Bank of America is excited to sponsor the 2026 World Cup, which will be co-hosted by the U.S., Canada and Mexico.
Bank of America reported last week that fourth-quarter revenue increased 15.4% year over year on higher asset management and investment banking fees as well as higher trading revenue. Earnings per share more than doubled from the year-ago period.
Commenting on his company's fourth quarter, Moynihan noted that it "saw better-than-industry growth in deposits and loans" and that "broad momentum sets up 2025 very well for Bank of America."
The financial stock remains a favorite on Wall Street despite its standing with the White House.
GE Aerospace soars
GE Aerospace (GE) stock soared 6.6% after the global aerospace company beat top- and bottom-line expectations for its fourth quarter and issued a better-than-expected outlook for 2025.
CEO Larry Culp said four-quarter results "capped off a monumental first year as a standalone company" for GE Aerospace.
GE Aerospace was spun off from General Electric in April and has generated a total return (capital appreciation plus dividends) of more than 35% since then.
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