S&P 500 Retreats from Record High as Banking Sector Weighs on Sentiment

A promising rally toward new peaks for the S&P 500 was cut short on Tuesday. The benchmark index closed in negative territory, snapping a multi-day winning streak. The reversal came despite a favorable inflation report, as disappointing bank earnings and political proposals targeting financial firms soured investor mood.

The trading session began on an optimistic note. December's U.S. Consumer Price Index (CPI) data revealed a core inflation reading of 2.6%, which came in lower than anticipated. This bolstered expectations for imminent interest rate cuts from the Federal Reserve, propelling the S&P 500 to an intraday high of 6,985.83 points. However, the focus swiftly shifted to the unfolding corporate earnings season and political headlines.

The financial sector came under significant pressure, acting as the primary drag on the broader market. JPMorgan Chase shares plummeted 4.2% after the banking giant reported disappointing revenue. Investor confidence was further shaken by a special charge related to its Apple Card business. Additional strain came from Washington, D.C., where a White House proposal to cap credit card interest rates triggered a sell-off in payment networks. Shares of Visa fell 4.5%, while Mastercard declined 3.8%.

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Technology Strength Fails to Offset Broad Declines

In contrast to the struggling financials, the technology sector demonstrated notable resilience. Semiconductor stocks were among the leaders, buoyed by analyst upgrades and persistent optimism surrounding artificial intelligence applications. Intel rallied 7.3%, and Advanced Micro Devices (AMD) gained 6.4%. The top performer across the entire S&P 500 was Moderna, whose stock surged 17.1% following an upgraded revenue forecast for 2025.

Despite these individual successes, the positive momentum was insufficient to counterbalance the losses from the heavyweight banking stocks. Although seven of the eleven S&P 500 sectors managed to close higher, the index overall retreated 0.19% to finish the day at 6,963.74 points.

Market Awaits Further Economic Clues

Investor attention now turns to the next set of economic indicators. The release of December's Producer Price Index (PPI) and retail sales figures will provide fresh insights into inflationary trends and consumer strength. Markets are currently navigating a tension between macroeconomic optimism fueled by receding inflation and the company-specific risks emerging from the current earnings period. Slightly negative moves in pre-market index futures suggest this period of uncertainty may persist in the near term.